UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) |
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||
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For the quarterly period ended June 30, | ||||||||||
OR | ||||||||||
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||
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For the transition period from to |
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| 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, North Carolina 28202-1803 704-382-3853 | 20-2777218 | |||||||||
Commission file number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, and Telephone Number | Commission file number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, and Telephone Number | ||||||||
1-4928 | DUKE ENERGY CAROLINAS, LLC (a North Carolina limited liability company) 526 South Church Street Charlotte,
704-382-3853 56-0205520 | 1-3274 |
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(a Florida corporation) | 299 First Avenue North St. Petersburg, Florida 33701 704-382-3853 59-0247770
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1-15929 |
(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, 704-382-3853
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1-3382 |
(a North Carolina corporation) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-0165465 | 1-3543 | DUKE ENERGY INDIANA, INC. (an Indiana corporation) 1000 East Main Street Plainfield, 704-382-3853
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Duke Energy Corporation (Duke Energy) | Yes x |
| Duke Energy Florida, Inc. (Duke Energy Florida) | Yes x | No ¨ | |
Duke Energy Carolinas, LLC (Duke Energy Carolinas) | Yes x | Duke Energy Ohio, Inc. (Duke Energy Ohio) | Yes x | No ¨ | ||
Progress Energy, | Yes x |
| Duke Energy Indiana, Inc. (Duke Energy Indiana) | Yes x | No ¨ | |
Duke Energy Progress, Inc. (Duke Energy Progress) | Yes x | No ¨ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Duke Energy | Yes x | No ¨ |
| Duke Energy | Yes x | No ¨ |
Duke Energy Carolinas | Yes x | No ¨ |
| Duke Energy Ohio | Yes x | No ¨ |
Progress Energy | Yes x | No ¨ | Duke Energy Indiana | Yes x | No ¨ | |
Duke Energy Progress | Yes x | No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
(Check one):
Duke Energy | Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
Duke Energy Carolinas | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ | |
Progress Energy | Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
Duke Energy Progress | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ |
Duke Energy Florida | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ |
Duke Energy Ohio | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ |
Duke Energy Indiana | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Duke Energy | No x |
| Duke Energy | Yes ¨ | No x | |
Duke Energy Carolinas | Yes ¨ | No x |
| Duke Energy Ohio | Yes ¨ | No x |
Progress Energy | Yes ¨ | No x | Duke Energy Indiana | Yes ¨ | No x | |
Duke Energy Progress | Yes ¨ | No x |
Indicate the numberNumber of shares of Common Stock outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date.at August 5, 2013:
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Registrant | Description | Shares |
Duke Energy | Common Stock, $0.001 par value |
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Duke Energy Carolinas | All of the registrant’s limited liability company member interests are directly owned by Duke Energy. | |
Progress Energy | All of the registrant’s common stock is directly owned by Duke Energy. | |
Duke Energy Progress | All of the registrant’s common stock is indirectly owned by Duke Energy. | |
Duke Energy Florida | All of the registrant’s common stock is indirectly owned by Duke Energy. | |
Duke Energy Ohio | All of the registrant’s common stock is indirectly owned by Duke Energy. | |
Duke Energy Indiana | All of the registrant’s common stock is indirectly owned by Duke Energy. |
This combined Form 10-Q is filed separately by fourseven registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
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FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2012 | ||||
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PART I. FINANCIAL INFORMATION |
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Item 1. | Financial Statements | 4 | ||
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| Duke Energy Corporation (Duke Energy) |
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| Unaudited Condensed Consolidated Statements of Operations | 4 | |
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| Unaudited Condensed Consolidated Comprehensive Income | 5 | |
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| Unaudited Condensed Consolidated Balance Sheets | 6 | |
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| Unaudited Condensed Consolidated Statements of Cash Flows | 8 | |
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| Unaudited Condensed Consolidated Statements of Equity | 9 | |
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| Duke Energy Carolinas, LLC (Duke Energy Carolinas) |
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| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income | 10 | |
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| Unaudited Condensed Consolidated Balance Sheets | 11 | |
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| Unaudited Condensed Consolidated Statements of Cash Flows | 13 | |
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| Unaudited Condensed Consolidated Statements of Member’s Equity | 14 | |
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| Duke Energy Ohio, Inc. (Duke Energy Ohio) |
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| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income | 15 | |
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| Unaudited Condensed Consolidated Balance Sheets | 16 | |
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| Unaudited Condensed Consolidated Statements of Cash Flows | 18 | |
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| Unaudited Condensed Consolidated Statements of Common Stockholder’s Equity | 19 | |
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| Duke Energy Indiana, Inc. (Duke Energy Indiana) |
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| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income | 20 | |
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| Unaudited Condensed Consolidated Balance Sheets | 21 | |
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| Unaudited Condensed Consolidated Statements of Cash Flows | 23 | |
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| Unaudited Condensed Consolidated Statements of Common Stockholder’s Equity | 24 | |
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| Combined Notes to Unaudited Condensed Consolidated Financial Statements for Duke Energy, Duke Energy Carolinas, |
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| Duke Energy Ohio and Duke Energy Indiana | 25 | ||
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2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 76 | ||
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3 | Quantitative and Qualitative Disclosures About Market Risk | 91 | ||
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4 | Controls and Procedures | 92 | ||
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PART II. OTHER INFORMATION |
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1 | Legal Proceedings | 93 | ||
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1A. | Risk Factors | 93 | ||
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2 | Unregistered Sales of Equity Securities and Use of Proceeds | 93 | ||
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5 | Other Information | 93 | ||
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6 | Exhibits | 95 | ||
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| Signatures | 96 |
TABLE OF CONTENTS | ||||
Safe Harbor for Forward-Looking Statements | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. | Financial Statements | |||
Duke Energy Corporation Financial Statements | 4 | |||
Duke Energy Carolinas, LLC Financial Statements | 9 | |||
Progress Energy, Inc. Financial Statements | 13 | |||
Duke Energy Progress, Inc. Financial Statements | 17 | |||
Duke Energy Florida, Inc. Financial Statements | 21 | |||
Duke Energy Ohio, Inc. Financial Statements | 25 | |||
Duke Energy Indiana, Inc. Financial Statements | 29 | |||
Combined Notes to Condensed Consolidated Financial Statements | ||||
Note 1 - Organization and Basis of Presentation | 33 | |||
Note 2 - Acquisitions and Dispositions | 35 | |||
Note 3 - Business Segments | 37 | |||
Note 4 - Regulatory Matters | 40 | |||
Note 5 - Commitments and Contingencies | 49 | |||
Note 6 - Debt and Credit Facilities | 56 | |||
Note 7 - Goodwill | 57 | |||
Note 8 - Risk Management, Derivative Instruments and Hedging Activities | 58 | |||
Note 9 - Investments in Debt and Equity Securities | 73 | |||
Note 10 - Fair Value of Financial Instruments | 79 | |||
Note 11 - Variable Interest Entities | 90 | |||
Note 12 - Earnings Per Common Share | 95 | |||
Note 13 - Stock-Based Compensation | 95 | |||
Note 14 - Employee Benefit Plans | 96 | |||
Note 15 - Severance | 99 | |||
Note 16 - Income Taxes and Other Taxes | 100 | |||
Note 17 - Related Party Transactions | 101 | |||
Note 18 - New Accounting Standards | 103 | |||
Note 19 - Subsequent Events | 103 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 104 | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 129 | ||
Item 4. | Controls and Procedures | 129 | ||
PART II. OTHER INFORMATION | ||||
Item 1. | Legal Proceedings | 130 | ||
Item 1A. | Risk Factors | 130 | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 130 | ||
Item 6. | Exhibits | 131 | ||
Signatures | 133 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions. These forward-looking statements, which are intended to cover Duke Energy and the applicable Duke Energy Registrants, are identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook,” and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:
· State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures;structures or market prices;
· The ability to recover eligible costs, including those associated with future significant weather events, and earn an adequate return on investment through the regulatory process;
· The scopecosts of necessary repairs of the delamination ofretiring Crystal River Unit 3 Nuclear Plant could prove to be more extensive than isare currently identified such repairs could prove not to be feasible resulting in earlyand all costs associated with the retirement of the unit, the cost of repair and/orCrystal River Unit 3 asset, including replacement power could exceed estimates and insurance coverage or may not be fully recoverable through the regulatory process;
·The ability to maintain relationships with customers, employees or suppliers post-merger;
·The ability to successfully integrate the Progress Energy businesses and realize cost savings and any other synergies expected from the merger;
· The risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect;
· The impact of compliance with material restrictions ofor conditions related to the Progress Energy merger imposed by regulators could exceed our expectations;
· Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
· Industrial, commercial and residential growth or decline in the respective Duke Energy Registrants’ service territories customer base or customer bases resulting from customer usage patterns;patterns, including energy efficiency efforts and use of alternative energy sources including self-generation and distributed generation technologies;
· Additional competition in electric markets and continued industry consolidation;
· Political and regulatory uncertainty in other countries in which Duke Energy conducts business;
· The influence of weather and other natural phenomena on each of the Duke Energy Registrants’ operations, including the economic, operational and other effects of severe storms, hurricanes, droughts and tornadoes;
· The ability to recover, in a timely manner, if at all, costs associated with future significant weather events through the regulatory process;successfully operate electric generating facilities and deliver electricity to customers;
· The impact on the Duke Energy Registrants’ facilities and business from a terrorist attack;attack, cyber security threats and other catastrophic events;
· The inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks;
· The timing and extent of changes in commodity prices,price, interest rates and foreign currency exchange rates;
·Unscheduled generation outages, unusual maintenance or repairsrates and electric transmission system constraints;
·The performancethe ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of electric generation facilities and of projects undertaken by Duke Energy’s non-regulated businesses;underlying assets;
· The results of financing efforts, including the Duke Energy Registrants’ ability to obtain financing on favorable terms, which can be affected by various factors, including the respective Duke Energy Registrants’ credit ratings and general economic conditions;
· Declines in the market prices of equity securities and resultant cash funding requirements for Duke Energy’s 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 ability to control operation and maintenance costs;
· The level of creditworthiness of counterparties to Duke Energy Registrants’ transactions;
· Employee workforce factors, including the potential inability to attract and retain key personnel;
· Growth in opportunities for the respectiveThe ability of subsidiaries to pay dividends or distributions to Duke Energy Registrants’ business units, includingCorporation holding company (the Parent);
·The performance of projects undertaken by our nonregulated businesses and the timing and success of efforts to invest in and develop domestic and international power and other projects;
·Construction and development risks associated with the completion of Duke Energy Registrants’ capital investment projects in existing and new generation facilities, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules, and satisfying operating and environmental performance standards, as well as the ability to recover costs from ratepayers in a timely manner or at all;opportunities;
· The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
· The impact of potential goodwill impairments;
·The ability to reinvest retained earnings of foreign subsidiaries or repatriate such earnings on a tax free basis; and
· The ability to successfully complete future merger, acquisition or divestiture plans.
In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than the Duke Energy hasRegistrants have described. TheForward-looking statements speak only as of the date they are made; the Duke Energy Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.otherwise that occur after that date.
PART I. FINANCIAL INFORMATION
PART I. FINANCIAL INFORMATION |
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Item 1. Financial Statements | |||||||||||||
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DUKE ENERGY CORPORATION | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||
(Unaudited) | |||||||||||||
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| Three Months Ended |
| Six Months Ended | ||||||||
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| June 30, | ||||||||
(in millions, except per-share amounts) | 2012 |
| 2011 |
| 2012 |
| 2011 | ||||||
Operating Revenues |
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| Regulated electric | $ | 2,628 |
| $ | 2,576 |
| $ | 5,129 |
| $ | 5,149 | |
| Non-regulated electric, natural gas, and other |
| 868 |
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| 864 |
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| 1,826 |
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| 1,719 | |
| Regulated natural gas |
| 81 |
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| 94 |
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| 252 |
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| 329 | |
| Total operating revenues |
| 3,577 |
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| 3,534 |
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| 7,207 |
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| 7,197 | |
Operating Expenses |
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| Fuel used in electric generation and purchased power - regulated |
| 849 |
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| 834 |
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| 1,626 |
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| 1,646 | |
| Fuel used in electric generation and purchased power - non-regulated |
| 396 |
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| 388 |
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| 844 |
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| 764 | |
| Cost of natural gas and coal sold |
| 42 |
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| 63 |
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| 144 |
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| 214 | |
| Operation, maintenance and other |
| 862 |
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| 959 |
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| 1,608 |
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| 1,839 | |
| Depreciation and amortization |
| 475 |
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| 437 |
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| 954 |
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| 891 | |
| Property and other taxes |
| 171 |
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| 169 |
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| 355 |
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| 355 | |
| Impairment charges |
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| 9 |
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| 402 |
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| 9 | |
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| Total operating expenses |
| 2,795 |
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| 2,859 |
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| 5,933 |
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| 5,718 |
Gains on Sales of Other Assets and Other, net |
| 4 |
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| 4 |
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| 7 |
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| 14 | ||
Operating Income |
| 786 |
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| 679 |
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| 1,281 |
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| 1,493 | ||
Other Income and Expenses |
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| Equity in earnings of unconsolidated affiliates |
| 40 |
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| 48 |
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| 85 |
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| 80 | |
| Impairments and gains on sales of unconsolidated affiliates |
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| 12 |
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| 14 | |
| Other income and expenses, net |
| 70 |
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| 97 |
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| 159 |
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| 214 | |
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| Total other income and expenses |
| 109 |
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| 157 |
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| 238 |
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| 308 |
Interest Expense |
| 232 |
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| 203 |
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| 456 |
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| 422 | ||
Income From Continuing Operations Before Income Taxes |
| 663 |
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| 633 |
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| 1,063 |
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| 1,379 | ||
Income Tax Expense from Continuing Operations |
| 214 |
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| 192 |
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| 317 |
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| 425 | ||
Income From Continuing Operations |
| 449 |
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| 441 |
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| 746 |
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| 954 | ||
(Loss) Income From Discontinued Operations, net of tax |
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| 1 |
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Net Income |
| 448 |
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| 441 |
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| 747 |
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| 954 | ||
Less: Net Income Attributable to Noncontrolling Interests |
| 4 |
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| 6 |
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| 8 |
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| 8 | ||
Net Income Attributable to Duke Energy Corporation | $ | 444 |
| $ | 435 |
| $ | 739 |
| $ | 946 | ||
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Earnings Per Share - Basic and Diluted |
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| Income from continuing operations attributable to Duke Energy Corporation common shareholders |
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| Basic | $ | 0.99 |
| $ | 0.98 |
| $ | 1.65 |
| $ | 2.13 |
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| Diluted | $ | 0.99 |
| $ | 0.98 |
| $ | 1.65 |
| $ | 2.13 |
| Income from discontinued operations attributable to Duke Energy Corporation common shareholders |
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| Basic | $ | ― |
| $ | ― |
| $ | ― |
| $ | ― |
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| Diluted | $ | ― |
| $ | ― |
| $ | ― |
| $ | ― |
| Net Income attributable to Duke Energy Corporation common shareholders |
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| Basic | $ | 0.99 |
| $ | 0.98 |
| $ | 1.65 |
| $ | 2.13 |
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| Diluted | $ | 0.99 |
| $ | 0.98 |
| $ | 1.65 |
| $ | 2.13 |
| Dividends declared per share | $ | 1.515 |
| $ | 1.485 |
| $ | 2.265 |
| $ | 2.22 | |
| Weighted-average shares outstanding |
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| Basic |
| 446 |
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| 444 |
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| 446 |
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| 444 |
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| Diluted |
| 446 |
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| 444 |
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| 446 |
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| 444 |
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ITEM 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||
(Unaudited) | ||||||||||||
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| Three Months Ended |
| Six Months Ended | ||||||||
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| June 30, |
| June 30, | ||||||||
(in millions) | 2012 |
| 2011 |
| 2012 |
| 2011 | |||||
Net income | $ | 448 |
| $ | 441 |
| $ | 747 |
| $ | 954 | |
Other comprehensive (loss) income, net of tax |
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| Foreign currency translation adjustments |
| (131) |
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| 65 |
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| (87) |
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| 96 |
| Pension and OPEB adjustments(a) |
| 2 |
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| 2 |
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| 6 |
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| (7) |
| Net unrealized loss on cash flow hedges(b) |
| (30) |
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| (7) |
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| (17) |
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| (5) |
| Reclassification into earnings from cash flow hedges(c) |
| 3 |
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| 1 |
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| 2 |
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| 2 |
| Unrealized gain on investments in auction rate securities(d) |
| 6 |
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| 1 |
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| 6 |
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| 4 |
| Unrealized gain on investments in available for sale securities(e) |
| 2 |
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| 3 |
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| Reclassification into earnings from available for sale securities(f) |
| (2) |
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Other comprehensive (loss) income, net of tax |
| (150) |
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| 62 |
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| (90) |
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| 90 | |
Comprehensive income |
| 298 |
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| 503 |
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| 657 |
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| 1,044 | |
Less: Comprehensive income attributable to Noncontrolling Interests |
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| 9 |
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| 4 |
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| 11 | |
Comprehensive income attributable to Duke Energy Corporation | $ | 298 |
| $ | 494 |
| $ | 653 |
| $ | 1,033 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Net of $1 million tax expense and $3 million tax expense for the three and six months ended June 30, 2012 and insignificant tax expense and $3 tax benefit for the three and six months ended June 30, 2011. | |||||||||||
(b) | Net of $14 million tax benefit and $9 million tax benefit for the three and six months ended June 30, 2012 and $3 million tax benefit and $2 million tax benefit for the three and six months ended June 30, 2011. | |||||||||||
(c) | Net of $2 million tax benefit and insignificant tax expense for the three and six months ended June 30, 2012 and $1 million tax expense for the three and six months ended June 30, 2011, respectively. | |||||||||||
(d) | Net of $2 million tax expense and $3 million tax expense for the three and six months ended June 30, 2012 and $2 million tax benefit and $1 million tax expense for the three and six months ended June 30, 2011. | |||||||||||
(e) | Net of insignificant tax expense for the three and six months ended June 30, 2012. | |||||||||||
(f) | Net of insignificant tax benefit for the three and six months ended June 30, 2012. | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUKE ENERGY CORPORATION | ||||||||||||||
Condensed Consolidated Statements Of Operations | ||||||||||||||
(Unaudited) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
(in millions, except per-share amounts) |
|
| 2013 |
|
| 2012 |
|
|
| 2013 |
|
| 2012 | |
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Regulated electric |
| $ | 4,834 |
| $ | 2,628 |
|
| $ | 9,723 |
| $ | 5,129 | |
Nonregulated electric, natural gas, and other |
|
| 951 |
|
| 868 |
|
|
| 1,775 |
|
| 1,826 | |
Regulated natural gas |
|
| 94 |
|
| 81 |
|
|
| 279 |
|
| 252 | |
| Total operating revenues |
|
| 5,879 |
|
| 3,577 |
|
|
| 11,777 |
|
| 7,207 |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fuel used in electric generation and purchased power - regulated |
|
| 1,678 |
|
| 849 |
|
|
| 3,381 |
|
| 1,626 | |
Fuel used in electric generation and purchased power - nonregulated |
|
| 447 |
|
| 396 |
|
|
| 901 |
|
| 844 | |
Cost of natural gas and coal sold |
|
| 43 |
|
| 42 |
|
|
| 147 |
|
| 144 | |
Operation, maintenance and other |
|
| 1,504 |
|
| 862 |
|
|
| 2,925 |
|
| 1,608 | |
Depreciation and amortization |
|
| 678 |
|
| 475 |
|
|
| 1,338 |
|
| 954 | |
Property and other taxes |
|
| 323 |
|
| 171 |
|
|
| 666 |
|
| 355 | |
Impairment charges |
|
| 386 |
|
| ― |
|
|
| 386 |
|
| 402 | |
| Total operating expenses |
|
| 5,059 |
|
| 2,795 |
|
|
| 9,744 |
|
| 5,933 |
Gains on Sales of Other Assets and Other, net |
|
| 1 |
|
| 4 |
|
|
| 3 |
|
| 7 | |
Operating Income |
|
| 821 |
|
| 786 |
|
|
| 2,036 |
|
| 1,281 | |
Other Income and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity in earnings of unconsolidated affiliates |
|
| 22 |
|
| 40 |
|
|
| 58 |
|
| 85 | |
Losses on sales of unconsolidated affiliates |
|
| (6) |
|
| (1) |
|
|
| (6) |
|
| (6) | |
Other income and expenses, net |
|
| 54 |
|
| 70 |
|
|
| 134 |
|
| 159 | |
| Total other income and expenses |
|
| 70 |
|
| 109 |
|
|
| 186 |
|
| 238 |
Interest Expense |
|
| 381 |
|
| 232 |
|
|
| 748 |
|
| 456 | |
Income From Continuing Operations Before Income Taxes |
|
| 510 |
|
| 663 |
|
|
| 1,474 |
|
| 1,063 | |
Income Tax Expense from Continuing Operations |
|
| 165 |
|
| 214 |
|
|
| 495 |
|
| 317 | |
Income From Continuing Operations |
|
| 345 |
|
| 449 |
|
|
| 979 |
|
| 746 | |
(Loss) Income From Discontinued Operations, net of tax |
|
| (3) |
|
| (1) |
|
|
| (3) |
|
| 1 | |
Net Income |
|
| 342 |
|
| 448 |
|
|
| 976 |
|
| 747 | |
Less: Net Income Attributable to Noncontrolling Interests |
|
| 3 |
|
| 4 |
|
|
| 3 |
|
| 8 | |
Net Income Attributable to Duke Energy Corporation |
| $ | 339 |
| $ | 444 |
|
| $ | 973 |
| $ | 739 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share - Basic and Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from continuing operations attributable to Duke Energy Corporation common shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Basic |
| $ | 0.48 |
| $ | 0.99 |
|
| $ | 1.37 |
| $ | 1.65 |
| Diluted |
| $ | 0.48 |
| $ | 0.99 |
|
| $ | 1.37 |
| $ | 1.65 |
Loss from discontinued operations attributable to Duke Energy Corporation common shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Basic |
| $ | ― |
| $ | ― |
|
| $ | ― |
| $ | ― |
| Diluted |
| $ | ― |
| $ | ― |
|
| $ | ― |
| $ | ― |
Net Income attributable to Duke Energy Corporation common shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Basic |
| $ | 0.48 |
| $ | 0.99 |
|
| $ | 1.37 |
| $ | 1.65 |
| Diluted |
| $ | 0.48 |
| $ | 0.99 |
|
| $ | 1.37 |
| $ | 1.65 |
Dividends declared per share |
| $ | 1.545 |
| $ | 1.515 |
|
| $ | 2.31 |
| $ | 2.265 | |
Weighted-average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Basic |
|
| 706 |
|
| 446 |
|
|
| 705 |
|
| 446 |
| Diluted |
|
| 706 |
|
| 446 |
|
|
| 706 |
|
| 446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
4
PART I
DUKE ENERGY CORPORATION | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
|
|
|
|
|
|
|
|
| June 30, |
| December 31, | ||
(in millions) | 2012 |
| 2011 | |||
ASSETS |
|
|
|
|
| |
Current Assets |
|
|
|
|
| |
Cash and cash equivalents | $ | 1,526 |
| $ | 2,110 | |
Short-term investments |
| 234 |
|
| 190 | |
Receivables (net of allowance for doubtful accounts of $16 at June 30, 2012 and $35 at December 31, 2011) |
| 610 |
|
| 784 | |
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $43 at June 30, 2012 and $40 at December 31, 2011) |
| 1,233 |
|
| 1,157 | |
Inventory |
| 1,762 |
|
| 1,588 | |
Other |
| 1,122 |
|
| 1,051 | |
| Total current assets |
| 6,487 |
|
| 6,880 |
Investments and Other Assets |
|
|
|
|
| |
Investments in equity method unconsolidated affiliates |
| 450 |
|
| 460 | |
Nuclear decommissioning trust funds |
| 2,204 |
|
| 2,060 | |
Goodwill |
| 3,842 |
|
| 3,849 | |
Intangibles, net |
| 357 |
|
| 363 | |
Notes receivable |
| 72 |
|
| 62 | |
Restricted other assets of variable interest entities |
| 133 |
|
| 135 | |
Other |
| 1,894 |
|
| 2,231 | |
| Total investments and other assets |
| 8,952 |
|
| 9,160 |
Property, Plant and Equipment |
|
|
|
|
| |
Cost |
| 61,458 |
|
| 60,377 | |
Cost, variable interest entities |
| 1,357 |
|
| 913 | |
Accumulated depreciation and amortization |
| (19,101) |
|
| (18,709) | |
Generation facilities to be retired, net |
| 73 |
|
| 80 | |
| Net property, plant and equipment |
| 43,787 |
|
| 42,661 |
Regulatory Assets and Deferred Debits |
|
|
|
|
| |
Regulatory assets |
| 3,646 |
|
| 3,672 | |
Other |
| 159 |
|
| 153 | |
| Total regulatory assets and deferred debits |
| 3,805 |
|
| 3,825 |
Total Assets | $ | 63,031 |
| $ | 62,526 | |
|
|
|
|
|
|
|
|
DUKE ENERGY CORPORATION |
|
|
|
|
|
|
| |||||||
Condensed Consolidated Statements Of Comprehensive Income |
|
|
|
|
|
|
| |||||||
(Unaudited) |
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
(in millions) | 2013 |
| 2012 |
|
| 2013 |
| 2012 | ||||||
Net Income |
| $ | 342 |
| $ | 448 |
|
| $ | 976 |
| $ | 747 | |
Other Comprehensive (Loss) Income, Net of Tax |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Foreign currency translation adjustments |
|
| (133) |
|
| (131) |
|
|
| (129) |
|
| (87) | |
Pension and OPEB adjustments |
|
| 2 |
|
| 2 |
|
|
| 5 |
|
| 6 | |
Net unrealized gain (loss) on cash flow hedges(a) |
|
| 44 |
|
| (30) |
|
|
| 54 |
|
| (17) | |
Reclassification into earnings from cash flow hedges |
|
| ― |
|
| 3 |
|
|
| ― |
|
| 2 | |
Unrealized gain on investments in auction rate securities |
|
| ― |
|
| 6 |
|
|
| ― |
|
| 6 | |
Unrealized (loss) gain on investments in available for sale securities |
|
| (4) |
|
| 2 |
|
|
| (4) |
|
| 3 | |
Reclassification into earnings from available for sale securities |
|
| ― |
|
| (2) |
|
|
| ― |
|
| (3) | |
Other Comprehensive Loss, Net of Tax |
|
| (91) |
|
| (150) |
|
|
| (74) |
|
| (90) | |
Comprehensive Income |
|
| 251 |
|
| 298 |
|
|
| 902 |
|
| 657 | |
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests |
|
| (1) |
|
| ― |
|
|
| (1) |
|
| 4 | |
Comprehensive Income Attributable to Duke Energy Corporation |
| $ | ��252 |
| $ | 298 |
|
| $ | 903 |
| $ | 653 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Net of $14 million tax expense and $18 million tax expense for the three and six months ended June 30, 2013 and $14 million tax benefit and $9 million tax benefit for the three and six months ended June 30, 2012. | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
5
PART I
DUKE ENERGY CORPORATION | DUKE ENERGY CORPORATION | DUKE ENERGY CORPORATION | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued) | ||||||||||||
Condensed Consolidated Balance Sheets | Condensed Consolidated Balance Sheets | |||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |
(in millions) | (in millions) | June 30, 2013 |
| December 31, 2012 | ||||||||
ASSETS | ASSETS |
|
|
|
|
| ||||||
Current Assets | Current Assets |
|
|
|
|
| ||||||
Cash and cash equivalents | Cash and cash equivalents | $ | 1,571 |
| $ | 1,424 | ||||||
Short-term investments | Short-term investments |
| 280 |
|
| 333 | ||||||
Receivables (net of allowance for doubtful accounts of $32 at June 30, 2013 and $34 at December 31, 2012) | Receivables (net of allowance for doubtful accounts of $32 at June 30, 2013 and $34 at December 31, 2012) |
| 1,593 |
|
| 1,516 | ||||||
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $42 at June 30, 2013 and $44 at December 31, 2012) | Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $42 at June 30, 2013 and $44 at December 31, 2012) |
| 1,235 |
|
| 1,201 | ||||||
Inventory | Inventory |
| 3,130 |
|
| 3,223 | ||||||
Other | Other |
| 2,066 |
|
| 2,425 | ||||||
|
| June 30, |
| December 31, | Total current assets |
| 9,875 |
|
| 10,122 | ||
(in millions, except per-share amounts) | 2012 |
| 2011 | |||||||||
Investments and Other Assets | Investments and Other Assets |
|
|
|
|
| ||||||
Investments in equity method unconsolidated affiliates | Investments in equity method unconsolidated affiliates |
| 508 |
|
| 483 | ||||||
Nuclear decommissioning trust funds | Nuclear decommissioning trust funds |
| 4,567 |
|
| 4,242 | ||||||
Goodwill | Goodwill |
| 16,345 |
|
| 16,365 | ||||||
Intangibles, net | Intangibles, net |
| 350 |
|
| 372 | ||||||
Notes receivable | Notes receivable |
| 68 |
|
| 71 | ||||||
Restricted other assets of variable interest entities | Restricted other assets of variable interest entities |
| 57 |
|
| 62 | ||||||
Other | Other |
| 2,412 |
|
| 2,399 | ||||||
| Total investments and other assets |
| 24,307 |
|
| 23,994 | ||||||
Property, Plant and Equipment | Property, Plant and Equipment |
|
|
|
|
| ||||||
Cost | Cost |
| 99,661 |
|
| 98,833 | ||||||
Cost, variable interest entities | Cost, variable interest entities |
| 1,666 |
|
| 1,558 | ||||||
Accumulated depreciation and amortization | Accumulated depreciation and amortization |
| (32,511) |
|
| (31,969) | ||||||
Generation facilities to be retired, net | Generation facilities to be retired, net |
| 61 |
|
| 136 | ||||||
| Net property, plant and equipment |
| 68,877 |
|
| 68,558 | ||||||
Regulatory Assets and Deferred Debits | Regulatory Assets and Deferred Debits |
|
|
|
|
| ||||||
Regulatory assets | Regulatory assets |
| 10,864 |
|
| 11,004 | ||||||
Other | Other |
| 177 |
|
| 178 | ||||||
| Total regulatory assets and deferred debits |
| 11,041 |
|
| 11,182 | ||||||
Total Assets | Total Assets | $ | 114,100 |
| $ | 113,856 | ||||||
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
|
|
|
| LIABILITIES AND EQUITY |
|
|
|
|
| |
Current Liabilities | Current Liabilities |
|
|
|
| Current Liabilities |
|
|
|
|
| |
Accounts payable | Accounts payable | $ | 1,160 |
| $ | 1,433 | Accounts payable | $ | 1,936 |
| $ | 2,444 |
Notes payable and commercial paper | Notes payable and commercial paper |
| 793 |
| 154 | Notes payable and commercial paper |
| 1,501 |
|
| 745 | |
Non-recourse notes payable of variable interest entities | Non-recourse notes payable of variable interest entities |
| 269 |
| 273 | Non-recourse notes payable of variable interest entities |
| 325 |
|
| 312 | |
Taxes accrued | Taxes accrued |
| 359 |
| 431 | Taxes accrued |
| 553 |
|
| 459 | |
Interest accrued | Interest accrued |
| 254 |
| 252 | Interest accrued |
| 451 |
|
| 448 | |
Current maturities of long-term debt | Current maturities of long-term debt |
| 1,870 |
| 1,894 | Current maturities of long-term debt |
| 2,223 |
|
| 3,110 | |
Other | Other |
| 1,434 |
| 1,091 | Other |
| 3,026 |
|
| 2,511 | |
| Total current liabilities |
| 6,139 |
| 5,528 | Total current liabilities |
| 10,015 |
|
| 10,029 | |
Long-term Debt | Long-term Debt |
| 17,539 |
| 17,730 | Long-term Debt |
| 36,100 |
|
| 35,499 | |
Non-recourse long-term debt of variable interest entities |
| 915 |
| 949 | ||||||||
Non-recourse Long-term Debt of Variable Interest Entities | Non-recourse Long-term Debt of Variable Interest Entities |
| 1,259 |
|
| 852 | ||||||
Deferred Credits and Other Liabilities | Deferred Credits and Other Liabilities |
|
|
|
| Deferred Credits and Other Liabilities |
|
|
|
|
| |
Deferred income taxes | Deferred income taxes |
| 7,914 |
| 7,581 | Deferred income taxes |
| 10,829 |
|
| 10,490 | |
Investment tax credits | Investment tax credits |
| 379 |
| 384 | Investment tax credits |
| 450 |
|
| 458 | |
Accrued pension and other post-retirement benefit costs | Accrued pension and other post-retirement benefit costs |
| 829 |
| 856 | Accrued pension and other post-retirement benefit costs |
| 2,373 |
|
| 2,520 | |
Asset retirement obligations | Asset retirement obligations |
| 1,999 |
| 1,936 | Asset retirement obligations |
| 5,284 |
|
| 5,169 | |
Regulatory liabilities | Regulatory liabilities |
| 2,981 |
| 2,919 | Regulatory liabilities |
| 5,483 |
|
| 5,584 | |
Other | Other |
| 1,820 |
| 1,778 | Other |
| 2,106 |
|
| 2,221 | |
| Total deferred credits and other liabilities |
| 15,922 |
| 15,454 | Total deferred credits and other liabilities |
| 26,525 |
|
| 26,442 | |
Commitments and Contingencies | Commitments and Contingencies |
|
|
|
| Commitments and Contingencies |
|
|
|
|
| |
Preferred Stock of Subsidiaries | Preferred Stock of Subsidiaries |
| ― |
|
| 93 | ||||||
Equity | Equity |
|
|
|
| Equity |
|
|
|
|
| |
Common Stock, $0.001 par value, 2 billion shared authorized; 446 million and 444 million shares outstanding at June 30, 2012 and December 31, 2011, respectively |
| 1 |
| 1 | ||||||||
Common stock, $0.001 par value, 2 billion shares authorized; 706 million and 704 million shares outstanding at June 30, 2013 and December 31, 2012, respectively | Common stock, $0.001 par value, 2 billion shares authorized; 706 million and 704 million shares outstanding at June 30, 2013 and December 31, 2012, respectively |
| 1 |
|
| 1 | ||||||
Additional paid-in capital | Additional paid-in capital |
| 21,140 |
| 21,132 | Additional paid-in capital |
| 39,284 |
|
| 39,279 | |
Retained earnings | Retained earnings |
| 1,598 |
| 1,873 | Retained earnings |
| 1,223 |
|
| 1,889 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss |
| (320) |
| (234) | Accumulated other comprehensive loss |
| (376) |
|
| (306) | |
| Total Duke Energy Corporation shareholders' equity |
| 22,419 |
| 22,772 | Total Duke Energy Corporation shareholders' equity |
| 40,132 |
|
| 40,863 | |
Noncontrolling interests | Noncontrolling interests |
| 97 |
| 93 | Noncontrolling interests |
| 69 |
|
| 78 | |
| Total equity |
| 22,516 |
| 22,865 | Total equity |
| 40,201 |
|
| 40,941 | |
Total Liabilities and Equity | Total Liabilities and Equity | $ | 63,031 |
| $ | 62,526 | Total Liabilities and Equity | $ | 114,100 |
| $ | 113,856 |
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
6
PART I
DUKE ENERGY CORPORATION | DUKE ENERGY CORPORATION | DUKE ENERGY CORPORATION | ||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
Condensed Consolidated Statements Of Cash Flows | Condensed Consolidated Statements Of Cash Flows | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
| Six Months Ended |
|
|
|
|
|
|
| ||||||
|
|
| June 30, |
|
| Six Months Ended June 30, | ||||||||||
(in millions) | (in millions) | 2012 |
| 2011 | (in millions) | 2013 |
| 2012 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| ||||
| Net income | $ | 747 |
| $ | 954 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||||||||||
Net income | Net income | $ | 976 |
| $ | 747 | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||||||||||
|
| Depreciation and amortization (including amortization of nuclear fuel) |
| 1,077 |
|
| 991 | Depreciation, amortization and accretion (including amortization of nuclear fuel) |
| 1,544 |
|
| 1,077 | |||
|
| Equity component of AFUDC |
| (116) |
|
| (123) | Equity component of AFUDC |
| (82) |
|
| (116) | |||
|
| Gains on sales of other assets |
| (7) |
|
| (27) | Losses (gains) on sales of other assets |
| 8 |
|
| (7) | |||
|
| Impairment of other long-lived assets |
| 408 |
|
| 9 | Impairment of other long-lived assets |
| 386 |
|
| 408 | |||
|
| Deferred income taxes |
| 230 |
|
| 461 | Deferred income taxes |
| 397 |
|
| 230 | |||
|
| Equity in earnings of unconsolidated affiliates |
| (85) |
|
| (80) | Equity in earnings of unconsolidated affiliates |
| (58) |
|
| (85) | |||
|
| Voluntary opportunity cost deferral |
| (101) |
|
| ― | Voluntary opportunity cost deferral |
| ― |
|
| (101) | |||
|
| Accrued pension and other post-retirement benefit costs |
| 57 |
|
| 52 | Accrued pension and other post-retirement benefit costs |
| 172 |
|
| 57 | |||
|
| (Increase) decrease in |
|
|
|
|
| (Increase) decrease in |
|
|
|
|
| |||
|
| Net realized and unrealized mark-to-market and hedging transactions |
| (10) |
|
| 13 |
| Net realized and unrealized mark-to-market and hedging transactions |
| 40 |
|
| (10) | ||
|
| Receivables |
| 61 |
|
| 166 |
| Receivables |
| (144) |
|
| 61 | ||
|
| Inventory |
| (165) |
|
| (85) |
| Inventory |
| 84 |
|
| (165) | ||
|
| Other current assets |
| 105 |
|
| 128 |
| Other current assets |
| (43) |
|
| 105 | ||
|
| Increase (decrease) in |
|
|
|
|
| Increase (decrease) in |
|
|
|
|
| |||
|
| Accounts payable |
| (102) |
|
| (338) |
| Accounts payable |
| (308) |
|
| (102) | ||
|
| Taxes accrued |
| (67) |
|
| (99) |
| Taxes accrued |
| 95 |
|
| (67) | ||
|
| Other current liabilities |
| 34 |
|
| (179) |
| Other current liabilities |
| 4 |
|
| 34 | ||
|
| Other assets |
| 22 |
|
| 81 | Other assets |
| (175) |
|
| 22 | |||
|
| Other liabilities |
| (86) |
|
| (207) | Other liabilities |
| (53) |
|
| (86) | |||
|
| Net cash provided by operating activities |
| 2,002 |
|
| 1,717 | Net cash provided by operating activities |
| 2,843 |
|
| 2,002 | |||
CASH FLOWS FROM INVESTING ACTIVITIES | CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| ||||
Capital expenditures | Capital expenditures |
| (2,715) |
|
| (2,252) | ||||||||||
Investment expenditures | Investment expenditures |
| (49) |
|
| (9) | ||||||||||
Acquisitions | Acquisitions |
| ― |
|
| (36) | ||||||||||
Purchases of available-for-sale securities | Purchases of available-for-sale securities |
| (2,827) |
|
| (1,240) | ||||||||||
Proceeds from sales and maturities of available-for-sale securities | Proceeds from sales and maturities of available-for-sale securities |
| 2,775 |
|
| 1,155 | ||||||||||
Net proceeds from the sales of other assets, and sales of and collections on notes receivable | Net proceeds from the sales of other assets, and sales of and collections on notes receivable |
| 38 |
|
| 23 | ||||||||||
Change in restricted cash | Change in restricted cash |
| 188 |
|
| (51) | ||||||||||
Other | Other |
| 28 |
|
| 19 | ||||||||||
| Net cash used in investing activities |
| (2,562) |
|
| (2,391) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| ||||||||||
Proceeds from the: | Proceeds from the: |
|
|
|
|
| ||||||||||
| Issuance of long-term debt |
| 1,832 |
|
| 721 | ||||||||||
| Issuance of common stock related to employee benefit plans |
| 7 |
|
| 14 | ||||||||||
Payments for the: | Payments for the: |
|
|
|
|
| ||||||||||
| Redemption of long-term debt |
| (1,538) |
|
| (878) | ||||||||||
| Redemption of preferred stock of a subsidiary |
| (96) |
|
| ― | ||||||||||
Notes payable and commercial paper | Notes payable and commercial paper |
| 763 |
|
| 631 | ||||||||||
Distributions to noncontrolling interests | Distributions to noncontrolling interests |
| (8) |
|
| (5) | ||||||||||
Dividends paid | Dividends paid |
| (1,085) |
|
| (670) | ||||||||||
Other | Other |
| (9) |
|
| (8) | ||||||||||
| Net cash used in financing activities |
| (134) |
|
| (195) | ||||||||||
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents |
| 147 |
|
| (584) | ||||||||||
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period |
| 1,424 |
|
| 2,110 | ||||||||||
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 1,571 |
| $ | 1,526 | ||||||||||
Supplemental Disclosures: | Supplemental Disclosures: |
|
|
|
|
| ||||||||||
Significant non-cash transactions: | Significant non-cash transactions: |
|
|
|
|
| ||||||||||
| Capital expenditures |
| (2,252) |
|
| (1,938) | Accrued capital expenditures | $ | 480 |
| $ | 216 | ||||
| Investment expenditures |
| (9) |
|
| (49) | Dividends declared but not paid |
| 551 |
|
| 344 | ||||
| Acquisitions |
| (36) |
|
| (4) | Extinguishment of debt related to investment in Attiki Gas Supply, S. A. |
| ― |
|
| 66 | ||||
| Purchases of available-for-sale securities |
| (1,240) |
|
| (1,266) |
|
|
|
|
|
|
| |||
| Proceeds from sales and maturities of available-for-sale securities |
| 1,155 |
|
| 1,281 | ||||||||||
| Net proceeds from the sales of other assets, and sales of and collections on notes receivable |
| 23 |
|
| 109 | ||||||||||
| Change in restricted cash |
| (51) |
|
| 24 | ||||||||||
| Other |
| 19 |
|
| 5 | ||||||||||
|
| Net cash used in investing activities |
| (2,391) |
|
| (1,838) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| |||||||||||
| Proceeds from the: |
|
|
|
|
| ||||||||||
|
| Issuance of long-term debt |
| 721 |
|
| 499 | |||||||||
|
| Issuance of common stock related to employee benefit plans |
| 14 |
|
| 10 | |||||||||
| Payments for the redemption of long-term debt |
| (878) |
|
| (82) | ||||||||||
| Notes payable and commercial paper |
| 631 |
|
| 63 | ||||||||||
| Distributions to noncontrolling interests |
| (5) |
|
| (18) | ||||||||||
| Dividends paid |
| (670) |
|
| (657) | ||||||||||
| Other |
| (8) |
|
| (2) | ||||||||||
|
| Net cash used in financing activities |
| (195) |
|
| (187) | |||||||||
| Net decrease in cash and cash equivalents |
| (584) |
|
| (308) | ||||||||||
| Cash and cash equivalents at beginning of period |
| 2,110 |
| 1,670 | |||||||||||
| Cash and cash equivalents at end of period | $ | 1,526 |
| $ | 1,362 | ||||||||||
| Supplemental Disclosures: |
|
|
|
| |||||||||||
| Significant non-cash transactions: |
|
|
|
| |||||||||||
|
| Accrued capital expenditures | $ | 216 |
| $ | 317 | |||||||||
|
| Dividends declared but not paid | $ | 344 |
| $ | 337 | |||||||||
|
| Extinguishment of debt related to investment in Attiki Gas Supply, S. A. | $ | 66 |
| $ | ― | |||||||||
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
7
PART I
DUKE ENERGY CORPORATION | DUKE ENERGY CORPORATION | DUKE ENERGY CORPORATION | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Statements Of Equity | Condensed Consolidated Statements Of Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Duke Energy Corporation Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Other Comprehensive Loss |
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Other Comprehensive Income (Loss) |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Gains |
|
|
|
| Pension and |
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
|
|
| Common |
|
|
| Additional |
|
|
| Foreign |
| (Losses) on |
|
|
|
| OPEB Related |
| Common |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
|
|
| Stock |
| Common |
| Paid-in |
| Retained |
| Currency |
| Cash Flow |
|
|
|
| Adjustments |
| Stockholders' |
| Noncontrolling |
| Total | |||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) | Shares |
| Stock |
| Capital |
| Earnings |
| Adjustments |
| Hedges |
| Other |
| to AOCI |
| Equity |
| Interests |
| Equity | (in millions) | Common Stock Shares |
| Common Stock |
| Additional Paid-in Capital |
| Retained Earnings |
| Foreign Currency Translation Adjustments |
| Net Gains (Losses) on Cash Flow Hedges |
| Net Gains (Losses) on Available for Sale Securities |
| Pension and OPEB Adjustments |
| Common Stockholders' Equity |
| Noncontrolling Interests |
| Total Equity | |||||||||||||||||||||
Balance at December 31, 2010 | 443 |
| $ | 1 |
| $ | 21,023 |
| $ | 1,496 |
| $ | 97 |
| $ | (18) |
| $ | (17) |
| $ | (60) |
| $ | 22,522 |
| $ | 131 |
| $ | 22,653 | ||||||||||||||||||||||||||||||||||
| Net income | ― |
|
| ― |
|
| ― |
|
| 946 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 946 |
|
| 8 |
|
| 954 | |||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ― |
|
| ― |
|
| ― |
|
| ― |
|
| 93 |
|
| (3) |
|
| 4 |
|
| (7) |
| �� | 87 |
|
| 3 |
|
| 90 | |||||||||||||||||||||||||||||||||
| Common stock issuances, including dividend reinvestment and employee benefits | 1 |
|
| ― |
|
| 22 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 22 |
|
| ― |
|
| 22 | |||||||||||||||||||||||||||||||||
| Common stock dividends | ― |
|
| ― |
|
| ― |
|
| (994) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (994) |
|
| ― |
|
| (994) | |||||||||||||||||||||||||||||||||
| Changes in noncontrolling interest in subsidiaries | ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (23) |
|
| (23) | |||||||||||||||||||||||||||||||||
Balance at June 30, 2011 | 444 |
| $ | 1 |
| $ | 21,045 |
| $ | 1,448 |
| $ | 190 |
| $ | (21) |
| $ | (13) |
| $ | (67) |
| $ | 22,583 |
| $ | 119 |
| $ | 22,702 | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Balance at December 31, 2011 | Balance at December 31, 2011 | 445 |
| $ | 1 |
| $ | 21,132 |
| $ | 1,873 |
| $ | (45) |
| $ | (71) |
| $ | (9) |
| $ | (109) |
| $ | 22,772 |
| $ | 93 |
| $ | 22,865 | Balance at December 31, 2011 | 445 |
| $ | 1 |
| $ | 21,132 |
| $ | 1,873 |
| $ | (45) |
| $ | (71) |
| $ | (9) |
| $ | (109) |
| $ | 22,772 |
| $ | 93 |
| $ | 22,865 | |
| Net income | ― |
|
| ― |
|
| ― |
|
| 739 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 739 |
|
| 8 |
|
| 747 | |||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income | ― |
|
| ― |
|
| ― |
|
| ― |
|
| (83) |
|
| (15) |
|
| 6 |
|
| 6 |
|
| (86) |
|
| (4) |
|
| (90) | |||||||||||||||||||||||||||||||||
| Common stock issuances, including dividend reinvestment and employee benefits | 1 |
|
| ― |
|
| 8 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 8 |
|
| ― |
|
| 8 | |||||||||||||||||||||||||||||||||
| Common stock dividends | ― |
|
| ― |
|
| ― |
|
| (1,014) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (1,014) |
|
| ― |
|
| (1,014) | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Net income | Net income | ― |
|
| ― |
|
| ― |
|
| 739 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 739 |
|
| 8 |
|
| 747 | |||||||||||||||||||||||||||||||||
Other comprehensive (loss) income | Other comprehensive (loss) income | ― |
|
| ― |
|
| ― |
|
| ― |
|
| (83) |
|
| (15) |
|
| 6 |
|
| 6 |
|
| (86) |
|
| (4) |
|
| (90) | |||||||||||||||||||||||||||||||||
Common stock issuances, including dividend reinvestment and employee benefits | Common stock issuances, including dividend reinvestment and employee benefits | 1 |
|
| ― |
|
| 8 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 8 |
|
| ― |
|
| 8 | |||||||||||||||||||||||||||||||||
Common stock dividends | Common stock dividends | ― |
|
| ― |
|
| ― |
|
| (1,014) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (1,014) |
|
| ― |
|
| (1,014) | |||||||||||||||||||||||||||||||||
Balance at June 30, 2012 | Balance at June 30, 2012 | 446 |
| $ | 1 |
| $ | 21,140 |
| $ | 1,598 |
| $ | (128) |
| $ | (86) |
| $ | (3) |
| $ | (103) |
| $ | 22,419 |
| $ | 97 |
| $ | 22,516 | Balance at June 30, 2012 | 446 |
| $ | 1 |
| $ | 21,140 |
| $ | 1,598 |
| $ | (128) |
| $ | (86) |
| $ | (3) |
| $ | (103) |
| $ | 22,419 |
| $ | 97 |
| $ | 22,516 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at December 31, 2012 | Balance at December 31, 2012 | 704 |
| $ | 1 |
| $ | 39,279 |
| $ | 1,889 |
| $ | (116) |
| $ | (100) |
| $ | ― |
| $ | (90) |
| $ | 40,863 |
| $ | 78 |
| $ | 40,941 | |||||||||||||||||||||||||||||||||
Net income | Net income | ― |
|
| ― |
|
| ― |
|
| 973 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 973 |
|
| 3 |
|
| 976 | |||||||||||||||||||||||||||||||||
Other comprehensive (loss) income | Other comprehensive (loss) income | ― |
|
| ― |
|
| ― |
|
| ― |
|
| (125) |
|
| 54 |
|
| (4) |
|
| 5 |
|
| (70) |
|
| (4) |
|
| (74) | |||||||||||||||||||||||||||||||||
Common stock issuances, including dividend reinvestment and employee benefits | Common stock issuances, including dividend reinvestment and employee benefits | 2 |
|
| ― |
|
| 5 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 5 |
|
| ― |
|
| 5 | |||||||||||||||||||||||||||||||||
Common stock dividends | Common stock dividends | ― |
|
| ― |
|
| ― |
|
| (1,636) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (1,636) |
|
| ― |
|
| (1,636) | |||||||||||||||||||||||||||||||||
Premium on the redemption of preferred stock of subsidiaries | Premium on the redemption of preferred stock of subsidiaries | ― |
|
| ― |
|
| ― |
|
| (3) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (3) |
|
| ― |
|
| (3) | |||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | Distributions to noncontrolling interests | ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (8) |
|
| (8) | |||||||||||||||||||||||||||||||||
Balance at June 30, 2013 | Balance at June 30, 2013 | 706 |
| $ | 1 |
| $ | 39,284 |
| $ | 1,223 |
| $ | (241) |
| $ | (46) |
| $ | (4) |
| $ | (85) |
| $ | 40,132 |
| $ | 69 |
| $ | 40,201 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
See Notes to Unaudited Condensed Consolidated Financial Statements
8
PART I
DUKE ENERGY CAROLINAS, LLC | DUKE ENERGY CAROLINAS, LLC | DUKE ENERGY CAROLINAS, LLC | ||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||||||||||||||||||||||||||
Condensed Consolidated Statements Of Operations And Comprehensive Income | Condensed Consolidated Statements Of Operations And Comprehensive Income | |||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
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| Three Months Ended |
| Six Months Ended |
| Three Months Ended June 30, |
| Six Months Ended June 30, | |||||||||||||||||||
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| June 30, |
| June 30, | |||||||||||||||||||||||
(in millions) | (in millions) | 2012 |
| 2011 |
| 2012 |
| 2011 | (in millions) | 2013 |
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| 2012 |
| 2013 |
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| 2012 | ||||||||||
Operating Revenues-Regulated Electric | $ | 1,616 |
| $ | 1,607 |
| $ | 3,117 |
| $ | 3,159 | |||||||||||||||||
Operating Revenues | Operating Revenues |
| $ | 1,591 |
| $ | 1,616 |
|
| $ | 3,320 |
| $ | 3,117 | ||||||||||||||
Operating Expenses | Operating Expenses |
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| Operating Expenses |
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| Fuel used in electric generation and purchased power |
| 442 |
|
| 511 |
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| 822 |
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| 980 | ||||||||||||||||
| Operation, maintenance and other |
| 476 |
|
| 495 |
|
| 807 |
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| 930 | ||||||||||||||||
| Depreciation and amortization |
| 226 |
|
| 190 |
|
| 454 |
|
| 391 | ||||||||||||||||
| Property and other taxes |
| 89 |
|
| 81 |
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| 179 |
|
| 165 | ||||||||||||||||
Fuel used in electric generation and purchased power | Fuel used in electric generation and purchased power |
|
| 443 |
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| 442 |
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| 961 |
|
| 822 | ||||||||||||||
Operation, maintenance and other | Operation, maintenance and other |
|
| 479 |
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| 476 |
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| 936 |
|
| 807 | ||||||||||||||
Depreciation and amortization | Depreciation and amortization |
|
| 226 |
|
| 226 |
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| 448 |
|
| 454 | ||||||||||||||
Property and other taxes | Property and other taxes |
|
| 92 |
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| 89 |
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| 192 |
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| 179 | ||||||||||||||
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| Total operating expenses |
| 1,233 |
|
| 1,277 |
|
| 2,262 |
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| 2,466 | Total operating expenses |
|
| 1,240 |
|
| 1,233 |
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| 2,537 |
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| 2,262 | |
Gains on Sales of Other Assets and Other, net | Gains on Sales of Other Assets and Other, net |
| 3 |
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| 1 |
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| 6 |
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| 1 | Gains on Sales of Other Assets and Other, net |
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| ― |
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| 3 |
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| 2 |
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| 6 | ||
Operating Income | Operating Income |
| 386 |
|
| 331 |
|
| 861 |
|
| 694 | Operating Income |
|
| 351 |
|
| 386 |
|
|
| 785 |
|
| 861 | ||
Other Income and Expenses, net | Other Income and Expenses, net |
| 43 |
|
| 50 |
|
| 82 |
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| 92 | Other Income and Expenses, net |
|
| 29 |
|
| 43 |
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| 65 |
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| 82 | ||
Interest Expense | Interest Expense |
| 93 |
|
| 82 |
|
| 190 |
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| 171 | Interest Expense |
|
| 91 |
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| 93 |
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| 173 |
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| 190 | ||
Income Before Income Taxes | Income Before Income Taxes |
| 336 |
|
| 299 |
|
| 753 |
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| 615 | Income Before Income Taxes |
|
| 289 |
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| 336 |
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| 677 |
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| 753 | ||
Income Tax Expense | Income Tax Expense |
| 125 |
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| 106 |
|
| 276 |
|
| 217 | Income Tax Expense |
|
| 108 |
|
| 125 |
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| 252 |
|
| 276 | ||
Net Income | Net Income |
| 211 |
|
| 193 |
|
| 477 |
|
| 398 | Net Income |
| $ | 181 |
| $ | 211 |
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| $ | 425 |
| $ | 477 | ||
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Other comprehensive income, net of tax | Other comprehensive income, net of tax |
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| Other comprehensive income, net of tax |
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Reclassification into earnings from cash flow hedges | Reclassification into earnings from cash flow hedges |
| 2 |
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| 1 |
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| 2 |
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| 1 | Reclassification into earnings from cash flow hedges |
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| ― |
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| 2 |
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| ― |
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| 2 | ||
Comprehensive Income | Comprehensive Income | $ | 213 |
| $ | 194 |
| $ | 479 |
| $ | 399 | Comprehensive Income |
| $ | 181 |
| $ | 213 |
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| $ | 425 |
| $ | 479 | ||
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(a) | Net of $2 million tax expense for the three and six months ended June 30, 2012 and 2011. | |||||||||||||||||||||||||||
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See Notes to Unaudited Condensed Consolidated Financial Statements
9
PART I
DUKE ENERGY CAROLINAS, LLC | DUKE ENERGY CAROLINAS, LLC | DUKE ENERGY CAROLINAS, LLC | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
Condensed Consolidated Balance Sheets | Condensed Consolidated Balance Sheets | |||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
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|
| June 30, |
| December 31, |
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(in millions) | (in millions) | 2012 |
| 2011 | (in millions) | June 30, 2013 |
| December 31, 2012 | ||||
ASSETS | ASSETS |
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| ASSETS |
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Current Assets | Current Assets |
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| Current Assets |
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Cash and cash equivalents | Cash and cash equivalents | $ | 18 |
| $ | 289 | Cash and cash equivalents | $ | 13 |
| $ | 19 |
Receivables (net of allowance for doubtful accounts of $3 at June 30, 2012 and December 31, 2011) |
| 351 |
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| 1,187 | |||||||
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at June 30, 2012 and December 31, 2011) |
| 680 |
|
| 581 | |||||||
Receivables (net of allowance for doubtful accounts of $3 at June 30, 2013 and December 31, 2012) | Receivables (net of allowance for doubtful accounts of $3 at June 30, 2013 and December 31, 2012) |
| 155 |
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| 188 | ||||||
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at June 30, 2013 and December 31, 2012) | Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at June 30, 2013 and December 31, 2012) |
| 669 |
|
| 637 | ||||||
Receivables from affiliated companies | Receivables from affiliated companies |
| 49 |
|
| 3 | ||||||
Notes receivable from affiliated companies | Notes receivable from affiliated companies |
| 215 |
|
| 382 | ||||||
Inventory | Inventory |
| 1,024 |
|
| 917 | Inventory |
| 1,063 |
|
| 1,062 |
Other | Other |
| 327 |
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| 278 | Other |
| 457 |
|
| 439 |
| Total current assets |
| 2,400 |
|
| 3,252 | Total current assets |
| 2,621 |
|
| 2,730 |
Investments and Other Assets | Investments and Other Assets |
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| Investments and Other Assets |
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Nuclear decommissioning trust funds | Nuclear decommissioning trust funds |
| 2,204 |
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| 2,060 | Nuclear decommissioning trust funds |
| 2,533 |
|
| 2,354 |
Other | Other |
| 971 |
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| 968 | Other |
| 948 |
|
| 934 |
| Total investments and other assets |
| 3,175 |
|
| 3,028 | Total investments and other assets |
| 3,481 |
|
| 3,288 |
Property, Plant and Equipment | Property, Plant and Equipment |
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| Property, Plant and Equipment |
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Cost | Cost |
| 33,505 |
|
| 32,840 | Cost |
| 34,534 |
|
| 34,190 |
Accumulated depreciation and amortization | Accumulated depreciation and amortization |
| (11,374) |
|
| (11,269) | Accumulated depreciation and amortization |
| (11,502) |
|
| (11,437) |
Generation facilities to be retired, net | Generation facilities to be retired, net |
| 73 |
|
| 80 | Generation facilities to be retired, net |
| ― |
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| 73 |
| Net property, plant and equipment |
| 22,204 |
|
| 21,651 | Net property, plant and equipment |
| 23,032 |
|
| 22,826 |
Regulatory Assets and Deferred Debits | Regulatory Assets and Deferred Debits |
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| Regulatory Assets and Deferred Debits |
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Regulatory assets | Regulatory assets |
| 1,891 |
|
| 1,894 | Regulatory assets |
| 1,836 |
|
| 1,727 |
Other | Other |
| 68 |
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| 71 | Other |
| 47 |
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| 71 |
| Total regulatory assets and deferred debits |
| 1,959 |
|
| 1,965 | Total regulatory assets and deferred debits |
| 1,883 |
|
| 1,798 |
Total Assets | Total Assets | $ | 29,738 |
| $ | 29,896 | Total Assets | $ | 31,017 |
| $ | 30,642 |
LIABILITIES AND MEMBER'S EQUITY | LIABILITIES AND MEMBER'S EQUITY |
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Current Liabilities | Current Liabilities |
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Accounts payable | Accounts payable | $ | 487 |
| $ | 599 | ||||||
Accounts payable to affiliated companies | Accounts payable to affiliated companies |
| 122 |
|
| 128 | ||||||
Taxes accrued | Taxes accrued |
| 108 |
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| 114 | ||||||
Interest accrued | Interest accrued |
| 99 |
|
| 96 | ||||||
Current maturities of long-term debt | Current maturities of long-term debt |
| 406 |
|
| 406 | ||||||
Other | Other |
| 441 |
|
| 490 | ||||||
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| Total current liabilities |
| 1,663 |
|
| 1,833 |
Long-term Debt | Long-term Debt |
| 7,734 |
|
| 7,735 | ||||||
Non-recourse Long-term Debt of Variable Interest Entities | Non-recourse Long-term Debt of Variable Interest Entities |
| 300 |
|
| 300 | ||||||
Long-term Debt Payable to Affiliated Companies | Long-term Debt Payable to Affiliated Companies |
| 300 |
|
| 300 | ||||||
Deferred Credits and Other Liabilities | Deferred Credits and Other Liabilities |
|
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Deferred income taxes | Deferred income taxes |
| 5,421 |
|
| 5,181 | ||||||
Investment tax credits | Investment tax credits |
| 213 |
|
| 215 | ||||||
Accrued pension and other post-retirement benefit costs | Accrued pension and other post-retirement benefit costs |
| 212 |
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| 221 | ||||||
Asset retirement obligations | Asset retirement obligations |
| 2,021 |
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| 1,959 | ||||||
Regulatory liabilities | Regulatory liabilities |
| 2,223 |
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| 2,102 | ||||||
Other | Other |
| 882 |
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| 924 | ||||||
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| Total deferred credits and other liabilities |
| 10,972 |
|
| 10,602 |
Commitments and Contingencies | Commitments and Contingencies |
|
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Member's Equity | Member's Equity |
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Member's Equity | Member's Equity |
| 10,064 |
|
| 9,888 | ||||||
Accumulated other comprehensive loss | Accumulated other comprehensive loss |
| (16) |
|
| (16) | ||||||
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| Total member's equity |
| 10,048 |
|
| 9,872 | |||||
Total Liabilities and Member's Equity | Total Liabilities and Member's Equity | $ | 31,017 |
| $ | 30,642 | ||||||
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See Notes to Unaudited Condensed Consolidated Financial Statements
10
PART I
DUKE ENERGY CAROLINAS, LLC | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued) | ||||||
(Unaudited) | ||||||
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|
| June 30, |
| December 31, | ||
(in millions) | 2012 |
| 2011 | |||
LIABILITIES AND MEMBER'S EQUITY |
|
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Current Liabilities |
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| |
Accounts payable | $ | 448 |
| $ | 793 | |
Taxes accrued |
| 109 |
|
| 126 | |
Interest accrued |
| 95 |
|
| 115 | |
Current maturities of long-term debt |
| 427 |
|
| 1,178 | |
Other |
| 481 |
|
| 398 | |
| Total current liabilities |
| 1,560 |
|
| 2,610 |
Long-term Debt |
| 7,795 |
|
| 7,796 | |
Non-recourse long-term debt of variable interest entities |
| 300 |
|
| 300 | |
Deferred Credits and Other Liabilities |
|
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| |
Deferred income taxes |
| 4,891 |
|
| 4,555 | |
Investment tax credits |
| 230 |
|
| 233 | |
Accrued pension and other post-retirement benefit costs |
| 232 |
|
| 248 | |
Asset retirement obligations |
| 1,904 |
|
| 1,846 | |
Regulatory liabilities |
| 1,993 |
|
| 1,928 | |
Other |
| 900 |
|
| 926 | |
| Total deferred credits and other liabilities |
| 10,150 |
|
| 9,736 |
Commitments and Contingencies |
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Member's Equity |
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Member's Equity |
| 9,950 |
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| 9,473 | |
Accumulated other comprehensive loss |
| (17) |
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| (19) | |
| Total member's equity |
| 9,933 |
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| 9,454 |
Total Liabilities and Member's Equity | $ | 29,738 |
| $ | 29,896 | |
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DUKE ENERGY CAROLINAS, LLC | |||||||
Condensed Consolidated Statements Of Cash Flows | |||||||
(Unaudited) | |||||||
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| Six Months Ended June 30, | ||||
(in millions) | 2013 |
| 2012 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income | $ | 425 |
| $ | 477 | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
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| Depreciation and amortization (including amortization of nuclear fuel) |
| 569 |
|
| 569 | |
| Equity component of AFUDC |
| (47) |
|
| (74) | |
| Gains on sales of other assets and other, net |
| (2) |
|
| (6) | |
| Deferred income taxes |
| 247 |
|
| 275 | |
| Voluntary opportunity cost deferral |
| ― |
|
| (101) | |
| Accrued pension and other post-retirement benefit costs |
| 20 |
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| 21 | |
| (Increase) decrease in |
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| |
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| Net realized and unrealized mark-to-market and hedging transactions |
| (7) |
|
| 1 |
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| Receivables |
| (3) |
|
| 51 |
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| Receivables from affiliated companies |
| (46) |
|
| 2 |
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| Inventory |
| (12) |
|
| (99) |
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| Other current assets |
| (14) |
|
| 8 |
| Increase (decrease) in |
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| |
|
| Accounts payable |
| (44) |
|
| (184) |
|
| Accounts payable to affiliated companies |
| (6) |
|
| (60) |
|
| Taxes accrued |
| (5) |
|
| (17) |
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| Other current liabilities |
| (50) |
|
| 76 |
| Other assets |
| (68) |
|
| (40) | |
| Other liabilities |
| (41) |
|
| (74) | |
| Net cash provided by operating activities |
| 916 |
|
| 825 | |
CASH FLOWS FROM INVESTING ACTIVITIES |
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Capital expenditures |
| (804) |
|
| (1,006) | ||
Purchases of available-for-sale securities |
| (1,122) |
|
| (607) | ||
Proceeds from sales and maturities of available-for-sale securities |
| 1,098 |
|
| 591 | ||
Notes receivable from affiliated companies |
| 167 |
|
| 679 | ||
Other |
| (10) |
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| (1) | ||
| Net cash used in investing activities |
| (671) |
|
| (344) | |
CASH FLOWS FROM FINANCING ACTIVITIES |
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Payments for the redemption of long-term debt |
| ― |
|
| (751) | ||
Distributions to parent |
| (249) |
|
| ― | ||
Other |
| (2) |
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| (1) | ||
Net cash used in financing activities |
| (251) |
|
| (752) | ||
Net decrease in cash and cash equivalents |
| (6) |
|
| (271) | ||
Cash and cash equivalents at beginning of period |
| 19 |
|
| 289 | ||
Cash and cash equivalents at end of period | $ | 13 |
| $ | 18 | ||
Supplemental Disclosures: |
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Significant non-cash transactions: |
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| Accrued capital expenditures | $ | 125 |
| $ | 104 | |
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See Notes to Unaudited Condensed Consolidated Financial Statements
11
PART I
DUKE ENERGY CAROLINAS, LLC | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
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| Six Months Ended | ||||
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| June 30, | ||||
(in millions) | 2012 |
| 2011 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
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| Net income | $ | 477 |
| $ | 398 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
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| |||
|
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| Depreciation and amortization (including amortization of nuclear fuel) |
| 569 |
|
| 486 | |
|
|
| Equity component of AFUDC |
| (74) |
|
| (82) | |
|
|
| Gains on sales of other assets and other, net |
| (6) |
|
| (1) | |
|
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| Deferred income taxes |
| 275 |
|
| 311 | |
|
|
| Voluntary opportunity cost deferral |
| (101) |
|
| ― | |
|
|
| Accrued pension and other post-retirement benefit costs |
| 21 |
|
| 17 | |
|
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| (Increase) decrease in |
|
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| |
|
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| Net realized and unrealized mark-to-market and hedging transactions |
| 1 |
|
| 2 |
|
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| Receivables |
| 53 |
|
| 143 |
|
|
|
| Inventory |
| (99) |
|
| (43) |
|
|
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| Other current assets |
| 8 |
|
| 141 |
|
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| Increase (decrease) in |
|
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| |
|
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| Accounts payable |
| (244) |
|
| (322) |
|
|
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| Taxes accrued |
| (17) |
|
| (29) |
|
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| Other current liabilities |
| 76 |
|
| (57) |
|
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| Other assets |
| (40) |
|
| (18) | |
|
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| Other liabilities |
| (74) |
|
| (143) | |
|
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| Net cash provided by operating activities |
| 825 |
|
| 803 |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
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|
| ||||
| Capital expenditures |
| (1,006) |
|
| (1,070) | |||
| Purchases of available-for-sale securities |
| (607) |
|
| (767) | |||
| Proceeds from sales and maturities of available-for-sale securities |
| 591 |
|
| 743 | |||
| Change in restricted cash |
| ― |
|
| 2 | |||
| Notes due from affiliate |
| 679 |
|
| (211) | |||
| Other |
| (1) |
|
| (6) | |||
|
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| Net cash used in investing activities |
| (344) |
|
| (1,309) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
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|
| ||||
| Proceeds from the issuance of long-term debt |
| ― |
|
| 499 | |||
| Payments for the redemption of long-term debt |
| (751) |
|
| (1) | |||
| Other |
| (1) |
|
| (2) | |||
|
|
|
| Net cash (used in) provided by financing activities |
| (752) |
|
| 496 |
| Net decrease in cash and cash equivalents |
| (271) |
|
| (10) | |||
| Cash and cash equivalents at beginning of period |
| 289 |
|
| 153 | |||
| Cash and cash equivalents at end of period | $ | 18 |
| $ | 143 | |||
| Supplemental Disclosures: |
|
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|
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| Significant non-cash transactions: |
|
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|
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| Accrued capital expenditures | $ | 104 |
| $ | 140 | ||
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DUKE ENERGY CAROLINAS, LLC | |||||||||||||
Condensed Consolidated Statements Of Equity | |||||||||||||
(Unaudited) | |||||||||||||
|
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|
|
| Accumulated Other Comprehensive Loss |
|
| |||||||
(in millions) |
| Member's Equity |
| Net Losses on Cash Flow Hedges |
| Net Losses on Available for Sale Securities |
| Total | |||||
Balance at December 31, 2011 |
| $ | 9,473 |
| $ | (17) |
| $ | (2) |
| $ | 9,454 | |
Net income |
|
| 477 |
|
| ― |
|
| ― |
|
| 477 | |
Other comprehensive income |
|
| ― |
|
| 2 |
|
| ― |
|
| 2 | |
Balance at June 30, 2012 |
| $ | 9,950 |
| $ | (15) |
| $ | (2) |
| $ | 9,933 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 |
| $ | 9,888 |
| $ | (15) |
| $ | (1) |
| $ | 9,872 | |
Net income |
|
| 425 |
|
| ― |
|
| ― |
|
| 425 | |
Distributions to parent |
|
| (249) |
|
| ― |
|
| ― |
|
| (249) | |
Balance at June 30, 2013 |
| $ | 10,064 |
| $ | (15) |
| $ | (1) |
| $ | 10,048 | |
|
|
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|
See Notes to Unaudited Condensed Consolidated Financial Statements
12
PART I
DUKE ENERGY CAROLINAS, LLC | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY | |||||||||||||
(Unaudited) | |||||||||||||
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|
|
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| Accumulated |
|
|
| ||||
|
|
|
|
|
| Other Comprehensive Income |
|
|
| ||||
|
|
|
|
|
| (Loss) |
|
|
| ||||
|
|
|
|
|
| Net Gains |
|
|
|
|
|
| |
|
|
|
|
|
| (Losses) on |
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|
|
|
|
| |
|
|
| Member's |
| Cash Flow |
|
|
|
|
|
| ||
(in millions) | Equity |
| Hedges |
| Other |
| Total | ||||||
Balance at December 31, 2010 | $ | 8,938 |
| $ | (20) |
| $ | (2) |
| $ | 8,916 | ||
| Net income |
| 398 |
|
| ― |
|
| ― |
|
| 398 | |
| Other comprehensive income |
|
|
|
| 1 |
|
|
|
|
| 1 | |
Balance at June 30, 2011 | $ | 9,336 |
| $ | (19) |
| $ | (2) |
| $ | 9,315 | ||
|
|
|
|
|
|
|
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|
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Balance at December 31, 2011 | $ | 9,473 |
| $ | (17) |
| $ | (2) |
| $ | 9,454 | ||
| Net income |
| 477 |
|
| ― |
|
| ― |
|
| 477 | |
| Other comprehensive income |
|
|
|
| 2 |
|
|
|
|
| 2 | |
Balance at June 30, 2012 | $ | 9,950 |
| $ | (15) |
| $ | (2) |
| $ | 9,933 | ||
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|
PROGRESS ENERGY, INC. | ||||||||||||||
Condensed Consolidated Statements Of Operations And Comprehensive Income | ||||||||||||||
(Unaudited) | ||||||||||||||
|
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|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
(in millions) | 2013 |
| 2012 |
| 2013 |
| 2012 | |||||||
Operating Revenues |
| $ | 2,281 |
| $ | 2,288 |
|
| $ | 4,467 |
| $ | 4,390 | |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fuel used in electric generation and purchased power |
|
| 918 |
|
| 1,002 |
|
|
| 1,778 |
|
| 1,903 | |
Operation, maintenance and other |
|
| 533 |
|
| 637 |
|
|
| 1,094 |
|
| 1,172 | |
Depreciation and amortization |
|
| 210 |
|
| 231 |
|
|
| 404 |
|
| 397 | |
Property and other taxes |
|
| 141 |
|
| 142 |
|
|
| 282 |
|
| 280 | |
Impairment charges |
|
| 366 |
|
| ― |
|
|
| 366 |
|
| ― | |
| Total operating expenses |
|
| 2,168 |
|
| 2,012 |
|
|
| 3,924 |
|
| 3,752 |
Gains on Sales of Other Assets and Other, net |
|
| 1 |
|
| 1 |
|
|
| 1 |
|
| 2 | |
Operating Income |
|
| 114 |
|
| 277 |
|
|
| 544 |
|
| 640 | |
Other Income and Expenses, net |
|
| 14 |
|
| 26 |
|
|
| 37 |
|
| 65 | |
Interest Expense |
|
| 160 |
|
| 193 |
|
|
| 358 |
|
| 378 | |
(Loss) Income From Continuing Operations Before Taxes |
|
| (32) |
|
| 110 |
|
|
| 223 |
|
| 327 | |
Income Tax (Benefit) Expense From Continuing Operations |
|
| (19) |
|
| 42 |
|
|
| 82 |
|
| 118 | |
(Loss) Income From Continuing Operations |
|
| (13) |
|
| 68 |
|
|
| 141 |
|
| 209 | |
(Loss) Income From Discontinued Operations, net of tax |
|
| (4) |
|
| (4) |
|
|
| (4) |
|
| 7 | |
Net (Loss) Income |
|
| (17) |
|
| 64 |
|
|
| 137 |
|
| 216 | |
Less: Net Income Attributable to Noncontrolling Interest |
|
| ― |
|
| 1 |
|
|
| 1 |
|
| 3 | |
Net (Loss) Income Attributable to Parent |
| $ | (17) |
| $ | 63 |
|
| $ | 136 |
| $ | 213 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income |
| $ | (17) |
| $ | 64 |
|
| $ | 137 |
| $ | 216 | |
Other Comprehensive Income (Loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Reclassification into earnings from pension and OPEB adjustments |
|
| ― |
|
| ― |
|
|
| 1 |
|
| 1 | |
Net unrealized gain (loss) on cash flow hedges |
|
| 2 |
|
| (2) |
|
|
| 3 |
|
| ― | |
Reclassification into earnings from cash flow hedges |
|
| ― |
|
| (2) |
|
|
| ― |
|
| ― | |
Other Comprehensive Income (Loss), net of tax |
|
| 2 |
|
| (4) |
|
|
| 4 |
|
| 1 | |
Comprehensive (Loss) Income |
| $ | (15) |
| $ | 60 |
|
| $ | 141 |
| $ | 217 | |
|
|
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|
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|
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|
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|
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|
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|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
13
PART I
DUKE ENERGY OHIO, INC. | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||||||||||
(Unaudited) | |||||||||||||
|
|
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|
|
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
|
| June 30, |
| June 30, | ||||||||
(in millions) | 2012 |
| 2011 |
| 2012 |
| 2011 | ||||||
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
| ||
| Regulated electric | $ | 336 |
| $ | 361 |
| $ | 660 |
| $ | 733 | |
| Non-regulated electric and other |
| 299 |
|
| 239 |
|
| 716 |
|
| 510 | |
| Regulated natural gas |
| 82 |
|
| 94 |
|
| 253 |
|
| 330 | |
|
| Total operating revenues |
| 717 |
|
| 694 |
|
| 1,629 |
|
| 1,573 |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
| ||
| Fuel used in electric generation and purchased power - regulated |
| 120 |
|
| 91 |
|
| 234 |
|
| 188 | |
| Fuel used in electric generation and purchased power - non-regulated |
| 176 |
|
| 147 |
|
| 415 |
|
| 311 | |
| Cost of natural gas |
| 12 |
|
| 22 |
|
| 87 |
|
| 141 | |
| Operation, maintenance and other |
| 175 |
|
| 215 |
|
| 371 |
|
| 420 | |
| Depreciation and amortization |
| 80 |
|
| 88 |
|
| 163 |
|
| 176 | |
| Property and other taxes |
| 60 |
|
| 63 |
|
| 128 |
|
| 136 | |
| Impairment charges |
| ― |
|
| 9 |
|
| ― |
|
| 9 | |
|
| Total operating expenses |
| 623 |
|
| 635 |
|
| 1,398 |
|
| 1,381 |
Gains on Sales of Other Assets and Other, net |
| 1 |
|
| ― |
|
| 2 |
|
| 2 | ||
Operating Income |
| 95 |
|
| 59 |
|
| 233 |
|
| 194 | ||
Other Income and Expenses, net |
| 4 |
|
| 4 |
|
| 8 |
|
| 9 | ||
Interest Expense |
| 25 |
|
| 27 |
|
| 49 |
|
| 51 | ||
Income Before Income Taxes |
| 74 |
|
| 36 |
|
| 192 |
|
| 152 | ||
Income Tax Expense |
| 29 |
|
| 3 |
|
| 73 |
|
| 46 | ||
Net Income |
| 45 |
|
| 33 |
|
| 119 |
|
| 106 | ||
Other Comprehensive Income, net of tax |
|
|
|
|
|
|
|
|
|
|
| ||
| Pension and OPEB adjustments(a) |
| ― |
|
| 1 |
|
| 1 |
|
| 1 | |
Comprehensive Income | $ | 45 |
| $ | 34 |
| $ | 120 |
| $ | 107 | ||
|
|
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|
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(a) | Net of insignificant tax expense for the three and six months ended June 30, 2012, and insignificant tax expense and $1 million tax expense for the three and six months ended June 30, 2011. | ||||||||||||
|
|
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|
PROGRESS ENERGY, INC. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(Unaudited) | ||||||
|
|
|
|
|
|
|
(in millions) | June 30, 2013 |
| December 31, 2012 | |||
ASSETS |
|
|
|
|
| |
Current Assets |
|
|
|
|
| |
Cash and cash equivalents | $ | 54 |
| $ | 231 | |
Receivables (net of allowance for doubtful accounts of $15 at June 30, 2013 and $16 at December 31, 2012) |
| 933 |
|
| 790 | |
Receivables from affiliated companies |
| 3 |
|
| 15 | |
Notes receivable from affiliated companies |
| 101 |
|
| ― | |
Inventory |
| 1,371 |
|
| 1,441 | |
Other |
| 728 |
|
| 766 | |
| Total current assets |
| 3,190 |
|
| 3,243 |
Investments and Other Assets |
|
|
|
|
| |
Nuclear decommissioning trust funds |
| 2,034 |
|
| 1,888 | |
Goodwill |
| 3,655 |
|
| 3,655 | |
Other |
| 516 |
|
| 530 | |
| Total investments and other assets |
| 6,205 |
|
| 6,073 |
Property, Plant and Equipment |
|
|
|
|
| |
Cost |
| 35,509 |
|
| 35,130 | |
Cost, variable interest entities |
| 16 |
|
| 16 | |
Accumulated depreciation and amortization |
| (12,723) |
|
| (12,512) | |
Generation facilities to be retired, net |
| 61 |
|
| 63 | |
| Net property, plant and equipment |
| 22,863 |
|
| 22,697 |
Regulatory Assets and Deferred Debits |
|
|
|
|
| |
Regulatory assets |
| 5,193 |
|
| 5,292 | |
Other |
| 100 |
|
| 100 | |
| Total regulatory assets and deferred debits |
| 5,293 |
|
| 5,392 |
Total Assets | $ | 37,551 |
| $ | 37,405 | |
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY |
|
|
|
|
| |
Current Liabilities |
|
|
|
|
| |
Accounts payable | $ | 813 |
| $ | 1,066 | |
Accounts payable to affiliated companies |
| 78 |
|
| 30 | |
Notes payable to affiliated companies |
| 858 |
|
| 455 | |
Taxes accrued |
| 208 |
|
| 83 | |
Interest accrued |
| 184 |
|
| 192 | |
Current maturities of long-term debt |
| 717 |
|
| 843 | |
Other |
| 1,285 |
|
| 1,118 | |
| Total current liabilities |
| 4,143 |
|
| 3,787 |
Long-term Debt |
| 13,503 |
|
| 13,311 | |
Long-term Debt Payable to Affiliated Companies |
| ― |
|
| 274 | |
Deferred Credits and Other Liabilities |
|
|
|
|
| |
Deferred income taxes |
| 2,654 |
|
| 2,558 | |
Investment tax credits |
| 91 |
|
| 95 | |
Accrued pension and other post-retirement benefit costs |
| 1,608 |
|
| 1,608 | |
Asset retirement obligations |
| 2,462 |
|
| 2,413 | |
Regulatory liabilities |
| 2,234 |
|
| 2,469 | |
Other |
| 535 |
|
| 612 | |
| Total deferred credits and other liabilities | 9,584 |
|
| 9,755 | |
Commitments and Contingencies |
|
|
|
|
| |
Preferred Stock of Subsidiaries |
| ― |
|
| 93 | |
Common Stockholder's Equity |
|
|
|
|
| |
Common stock, $0.01 par value, 100 shares authorized and outstanding at June 30, 2013 and December 31, 2012 |
| ― |
|
| ― | |
Additional paid-in capital |
| 7,465 |
|
| 7,465 | |
Retained earnings |
| 2,916 |
|
| 2,783 | |
Accumulated other comprehensive loss |
| (63) |
|
| (67) | |
| Total common stockholder's equity |
| 10,318 |
|
| 10,181 |
Noncontrolling interests |
| 3 |
|
| 4 | |
| Total equity |
| 10,321 |
|
| 10,185 |
Total Liabilities and Common Stockholder's Equity | $ | 37,551 |
| $ | 37,405 | |
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
14
PART I
DUKE ENERGY OHIO, INC. | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
|
|
|
|
|
|
|
|
| June 30, |
| December 31, | ||
(in millions) | 2012 |
| 2011 | |||
ASSETS |
|
|
|
|
| |
Current Assets |
|
|
|
|
| |
Cash and cash equivalents | $ | 22 |
| $ | 99 | |
Receivables (net of allowance for doubtful accounts of $1 at June 30, 2012 and $16 at December 31, 2011) |
| 760 |
|
| 681 | |
Inventory |
| 262 |
|
| 243 | |
Other |
| 258 |
|
| 220 | |
| Total current assets |
| 1,302 |
|
| 1,243 |
Investments and Other Assets |
|
|
|
|
| |
Goodwill |
| 921 |
|
| 921 | |
Intangibles, net |
| 136 |
|
| 143 | |
Other |
| 63 |
|
| 58 | |
| Total investments and other assets |
| 1,120 |
|
| 1,122 |
Property, Plant and Equipment |
|
|
|
|
| |
Cost |
| 10,612 |
|
| 10,632 | |
Accumulated depreciation and amortization |
| (2,600) |
|
| (2,594) | |
| Net property, plant and equipment |
| 8,012 |
|
| 8,038 |
Regulatory Assets and Deferred Debits |
|
|
|
|
| |
Regulatory assets |
| 529 |
|
| 520 | |
Other |
| 15 |
|
| 16 | |
| Total regulatory assets and deferred debits |
| 544 |
|
| 536 |
Total Assets | $ | 10,978 |
| $ | 10,939 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROGRESS ENERGY, INC. | ||||||||
Condensed Consolidated Statements Of Cash Flows | ||||||||
(Unaudited) |
|
|
|
|
| |||
| ||||||||
|
|
| Six Months Ended June 30, | |||||
(in millions) | 2013 |
| 2012 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| |||
Net income | $ | 137 |
| $ | 216 | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| |||
| Depreciation, amortization and accretion (including amortization of nuclear fuel) |
| 480 |
|
| 459 | ||
| Equity component of AFUDC |
| (27) |
|
| (49) | ||
| Losses (gains) on sales of other assets and other, net |
| 4 |
|
| (19) | ||
| Impairment charges |
| 366 |
|
| ― | ||
| Deferred income taxes |
| 71 |
|
| 169 | ||
| Accrued pension and other post-retirement benefit costs |
| 105 |
|
| 82 | ||
| Contributions to qualified pension plans |
| ― |
|
| (42) | ||
| (Increase) decrease in |
|
|
|
|
| ||
|
| Net realized and unrealized mark-to-market and hedging transactions |
| 23 |
|
| (63) | |
|
| Receivables |
| (148) |
|
| (6) | |
|
| Receivables from affiliated companies |
| 12 |
|
| ― | |
|
| Inventory |
| 69 |
|
| 8 | |
|
| Other current assets |
| (33) |
|
| (72) | |
| Increase (decrease) in |
|
|
|
|
| ||
|
| Accounts payable |
| (203) |
|
| 26 | |
|
| Accounts payable to affiliated companies |
| 48 |
|
| ― | |
|
| Taxes accrued |
| 124 |
|
| 107 | |
|
| Other current liabilities |
| 169 |
|
| (25) | |
| Other assets |
| (126) |
|
| 1 | ||
| Other liabilities |
| 88 |
|
| (84) | ||
| Net cash provided by operating activities |
| 1,159 |
|
| 708 | ||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| |||
Capital expenditures |
| (1,295) |
|
| (1,118) | |||
Purchases of available-for-sale securities |
| (978) |
|
| (625) | |||
Proceeds from sales and maturities of available-for-sale securities |
| 960 |
|
| 610 | |||
Change in restricted cash |
| ― |
|
| (14) | |||
Notes receivable from affiliated companies |
| (101) |
|
| ― | |||
Other |
| 21 |
|
| 68 | |||
| Net cash used in investing activities |
| (1,393) |
|
| (1,079) | ||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| |||
Proceeds from the: |
|
|
|
|
| |||
| Issuance of long-term debt |
| 545 |
|
| 1,432 | ||
| Issuance of common stock related to employee benefit plans |
| ― |
|
| 6 | ||
Payments for the: |
|
|
|
|
| |||
| Redemption of long-term debt |
| (788) |
|
| (455) | ||
| Redemption of preferred stock of subsidiaries |
| (96) |
|
| ― | ||
Payments of short-term debt with original maturities greater than 90 days |
| ― |
|
| (65) | |||
Proceeds from issuance of short-term debt with original maturities greater than 90 days |
| ― |
|
| 65 | |||
Notes payable and commercial paper |
| ― |
|
| (326) | |||
Notes payable to affiliated companies |
| 403 |
|
| ― | |||
Distributions to noncontrolling interests |
| (2) |
|
| (4) | |||
Dividends paid |
| ― |
|
| (446) | |||
Other |
| (5) |
|
| 7 | |||
| Net cash provided by financing activities |
| 57 |
|
| 214 | ||
Net decrease in cash and cash equivalents |
| (177) |
|
| (157) | |||
Cash and Cash Equivalents at Beginning of Period |
| 231 |
|
| 230 | |||
Cash and Cash Equivalents at End of Period | $ | 54 |
| $ | 73 | |||
Supplemental Disclosures: |
|
|
|
|
| |||
Significant non-cash transactions: |
|
|
|
|
| |||
| Accrued capital expenditures | $ | 310 |
| $ | 265 | ||
| Capital expenditures financed through capital leases |
| ― |
|
| 116 | ||
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
15
PART I
DUKE ENERGY OHIO, INC. | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued) | ||||||
(Unaudited) | ||||||
| ||||||
|
| June 30, |
| December 31, | ||
(in millions, except share and per-share amounts) | 2012 |
| 2011 | |||
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY |
|
|
|
|
| |
Current Liabilities |
|
|
|
|
| |
Accounts payable | $ | 363 |
| $ | 402 | |
Taxes accrued |
| 158 |
|
| 180 | |
Interest accrued |
| 23 |
|
| 23 | |
Current maturities of long-term debt |
| 757 |
|
| 507 | |
Other |
| 117 |
|
| 122 | |
| Total current liabilities |
| 1,418 |
|
| 1,234 |
Long-term Debt |
| 1,794 |
|
| 2,048 | |
Deferred Credits and Other Liabilities |
|
|
|
|
| |
Deferred income taxes |
| 1,882 |
|
| 1,853 | |
Investment tax credits |
| 7 |
|
| 8 | |
Accrued pension and other post-retirement benefit costs |
| 142 |
|
| 147 | |
Asset retirement obligations |
| 28 |
|
| 27 | |
Regulatory liabilities |
| 261 |
|
| 273 | |
Other |
| 187 |
|
| 182 | |
| Total deferred credits and other liabilities |
| 2,507 |
|
| 2,490 |
Commitments and Contingencies |
|
|
|
|
| |
Common Stockholder's Equity |
|
|
|
|
| |
Common Stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at June 30, 2012 and December 31, 2011 |
| 762 |
|
| 762 | |
Additional paid-in capital |
| 5,057 |
|
| 5,085 | |
Accumulated deficit |
| (533) |
|
| (652) | |
Accumulated other comprehensive loss |
| (27) |
|
| (28) | |
| Total common stockholder's equity |
| 5,259 |
|
| 5,167 |
Total Liabilities and Common Stockholder's Equity | $ | 10,978 |
| $ | 10,939 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROGRESS ENERGY, INC. | |||||||||||||||||||||||||
Condensed Consolidated Statements of Equity | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Other Comprehensive Loss |
|
|
|
|
|
|
|
|
| ||||
(in millions) |
| Common Stock |
| Additional Paid-in Capital |
| Retained Earnings |
| Net Losses on Cash Flow Hedges |
| Pension and OPEB Related Adjustments |
| Common Stockholders' Equity |
| Noncontrolling Interests |
| Total Equity | |||||||||
Balance at December 31, 2011 |
| $ | 7,418 |
| $ | 16 |
| $ | 2,752 |
| $ | (142) |
| $ | (23) |
| $ | 10,021 |
| $ | 4 |
| $ | 10,025 | |
Net income(a) |
|
| ― |
|
| ― |
|
| 213 |
|
| ― |
|
| ― |
|
| 213 |
|
| 1 |
|
| 214 | |
Other comprehensive income |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 1 |
|
| 1 |
|
| ― |
|
| 1 | |
Common stock issuances, including dividend reinvestment and employee benefits |
|
| 25 |
|
| 6 |
|
| ― |
|
| ― |
|
| ― |
|
| 31 |
|
| ― |
|
| 31 | |
Common stock dividends |
|
| ― |
|
| ― |
|
| (369) |
|
| ― |
|
| ― |
|
| (369) |
|
| ― |
|
| (369) | |
Distributions to noncontrolling interests |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (2) |
|
| (2) | |
Balance at June 30, 2012 |
| $ | 7,443 |
| $ | 22 |
| $ | 2,596 |
| $ | (142) |
| $ | (22) |
| $ | 9,897 |
| $ | 3 |
| $ | 9,900 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 |
| $ | ― |
| $ | 7,465 |
| $ | 2,783 |
| $ | (42) |
| $ | (25) |
| $ | 10,181 |
| $ | 4 |
| $ | 10,185 | |
Net income |
|
| ― |
|
| ― |
|
| 136 |
|
| ― |
|
| ― |
|
| 136 |
|
| 1 |
|
| 137 | |
Other comprehensive income |
|
| ― |
|
| ― |
|
| ― |
|
| 3 |
|
| 1 |
|
| 4 |
|
| ― |
|
| 4 | |
Premium on the redemption of preferred stock of subsidiaries |
|
| ― |
|
| ― |
|
| (3) |
|
| ― |
|
| ― |
|
| (3) |
|
| ― |
|
| (3) | |
Distributions to noncontrolling interests |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (2) |
|
| (2) | |
Balance at June 30, 2013 |
| $ | ― |
| $ | 7,465 |
| $ | 2,916 |
| $ | (39) |
| $ | (24) |
| $ | 10,318 |
| $ | 3 |
| $ | 10,321 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | For the six months ended June 30, 2012, consolidated net income of $216 million includes $2 million attributable to preferred shareholders of subsidiaries. Income attributable to preferred shareholders of subsidiaries is not a component of total equity and is excluded from the table above. | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
16
PART I
DUKE ENERGY OHIO, INC. | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended | |||
|
|
|
|
|
| June 30, | |||
(in millions) |
| 2012 |
|
| 2011 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| ||||
| Net income | $ | 119 |
| $ | 106 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| |||
|
|
| Depreciation and amortization |
| 165 |
|
| 177 | |
|
|
| Gains on sales of other assets and other, net |
| (2) |
|
| (2) | |
|
|
| Impairment charges |
| ― |
|
| 9 | |
|
|
| Deferred income taxes |
| 69 |
|
| 85 | |
|
|
| Accrued pension and other post-retirement benefit costs |
| 6 |
|
| 6 | |
|
|
| (Increase) decrease in |
|
|
|
|
| |
|
|
|
| Net realized and unrealized mark-to-market and hedging transactions |
| (11) |
|
| 12 |
|
|
|
| Receivables |
| 51 |
|
| 124 |
|
|
|
| Inventory |
| (20) |
|
| (4) |
|
|
|
| Other current assets |
| 29 |
|
| 15 |
|
|
| Increase (decrease) in |
|
|
|
|
| |
|
|
|
| Accounts payable |
| (33) |
|
| (79) |
|
|
|
| Taxes accrued |
| (22) |
|
| (55) |
|
|
|
| Other current liabilities |
| (14) |
|
| (6) |
|
|
| Other assets |
| (11) |
|
| 23 | |
|
|
| Other liabilities |
| (75) |
|
| (45) | |
|
|
|
| Net cash provided by operating activities |
| 251 |
|
| 366 |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| ||||
| Capital expenditures |
| (252) |
|
| (230) | |||
| Net proceeds from the sales of other assets |
| 82 |
|
| ― | |||
| Notes due from affiliate |
| (130) |
|
| 86 | |||
| Change in restricted cash |
| (25) |
|
| 4 | |||
| Other |
| 1 |
|
| ― | |||
|
|
|
| Net cash used in investing activities |
| (324) |
|
| (140) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| ||||
| Payments for the redemption of long-term debt |
| (4) |
|
| (4) | |||
| Dividends to parent |
| ― |
|
| (285) | |||
|
|
|
| Net cash used in financing activities |
| (4) |
|
| (289) |
| Net decrease in cash and cash equivalents |
| (77) |
|
| (63) | |||
| Cash and cash equivalents at beginning of period |
| 99 |
|
| 228 | |||
| Cash and cash equivalents at end of period | $ | 22 |
| $ | 165 | |||
| Supplemental Disclosures: |
|
|
|
|
| |||
| Significant non-cash transactions: |
|
|
|
|
| |||
|
| Accrued capital expenditures | $ | 37 |
| $ | 25 | ||
|
| Transfer of Vermillion Generating Station to Duke Energy Indiana | $ | 28 |
| $ | ― | ||
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
DUKE ENERGY PROGRESS, INC. | ||||||||||||||
Condensed Consolidated Statements Of Operations And Comprehensive Income | ||||||||||||||
(Unaudited) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
(in millions) | 2013 |
| 2012 |
| 2013 |
| 2012 | |||||||
Operating Revenues |
| $ | 1,135 |
| $ | 1,090 |
|
| $ | 2,351 |
| $ | 2,180 | |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fuel used in electric generation and purchased power |
|
| 441 |
|
| 433 |
|
|
| 896 |
|
| 853 | |
Operation, maintenance and other |
|
| 340 |
|
| 388 |
|
|
| 692 |
|
| 762 | |
Depreciation and amortization |
|
| 113 |
|
| 134 |
|
|
| 250 |
|
| 268 | |
Property and other taxes |
|
| 53 |
|
| 52 |
|
|
| 113 |
|
| 108 | |
Impairment charges |
|
| 22 |
|
| ― |
|
|
| 22 |
|
| ― | |
| Total operating expenses |
|
| 969 |
|
| 1,007 |
|
|
| 1,973 |
|
| 1,991 |
Gains on Sales of Other Assets and Other, net |
|
| ― |
|
| ― |
|
|
| ― |
|
| 1 | |
Operating Income |
|
| 166 |
|
| 83 |
|
|
| 378 |
|
| 190 | |
Other Income and Expenses, net |
|
| 8 |
|
| 16 |
|
|
| 22 |
|
| 36 | |
Interest Expense |
|
| 47 |
|
| 53 |
|
|
| 95 |
|
| 104 | |
Income Before Income Taxes |
|
| 127 |
|
| 46 |
|
|
| 305 |
|
| 122 | |
Income Tax Expense |
|
| 50 |
|
| 15 |
|
|
| 118 |
|
| 39 | |
Net Income |
|
| 77 |
|
| 31 |
|
|
| 187 |
|
| 83 | |
Less: Preferred Stock Dividend Requirement |
|
| ― |
|
| ― |
|
|
| ― |
|
| 1 | |
Net Income Available to Parent |
| $ | 77 |
| $ | 31 |
|
| $ | 187 |
| $ | 82 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 77 |
| $ | 31 |
|
| $ | 187 |
| $ | 83 | |
Other Comprehensive Loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net unrealized loss on cash flow hedges |
|
| ― |
|
| (4) |
|
|
| ― |
|
| (1) | |
Reclassification into earnings from cash flow hedges |
|
| ― |
|
| (2) |
|
|
| ― |
|
| ― | |
Other Comprehensive Loss, net of tax |
|
| ― |
|
| (6) |
|
|
| ― |
|
| (1) | |
Comprehensive Income |
| $ | 77 |
| $ | 25 |
|
| $ | 187 |
| $ | 82 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
17
PART I
DUKE ENERGY OHIO, INC. | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY | |||||||||||||||||
(Unaudited) | |||||||||||||||||
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Other |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive Income (Loss) |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
| Additional |
| Retained |
| Pension and |
|
|
| |||||
|
| Common |
| Paid-in |
| Earnings |
| OPEB |
|
|
| ||||||
(in millions) |
| Stock |
| Capital |
| (Deficit) |
| Adjustments |
| Total | |||||||
Balance at December 31, 2010 |
| $ | 762 |
| $ | 5,570 |
| $ | (846) |
| $ | (22) |
| $ | 5,464 | ||
| Net income |
|
| ― |
|
| ― |
|
| 106 |
|
| ― |
|
| 106 | |
| Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
| 1 |
|
| 1 | |
| Dividend to parent |
|
| ― |
|
| (285) |
|
| ― |
|
| ― |
|
| (285) | |
Balance at June 30, 2011 |
| $ | 762 |
| $ | 5,285 |
| $ | (740) |
| $ | (21) |
| $ | 5,286 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011 |
| $ | 762 |
| $ | 5,085 |
| $ | (652) |
| $ | (28) |
| $ | 5,167 | ||
| Net income |
|
| ― |
|
| ― |
|
| 119 |
|
| ― |
|
| 119 | |
| Other comprehensive income |
|
| ― |
|
| ― |
|
| ― |
|
| 1 |
|
| 1 | |
| Transfer of Vermillion Generating Station to Duke Energy Indiana |
|
| ― |
|
| (28) |
|
| ― |
|
| ― |
|
| (28) | |
Balance at June 30, 2012 |
| $ | 762 |
| $ | 5,057 |
| $ | (533) |
| $ | (27) |
| $ | 5,259 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUKE ENERGY PROGRESS, INC. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(Unaudited) | ||||||
|
|
|
|
|
|
|
(in millions) | June 30, 2013 |
| December 31, 2012 | |||
ASSETS |
|
|
|
|
| |
Current Assets |
|
|
|
|
| |
Cash and cash equivalents | $ | 20 |
| $ | 18 | |
Receivables (net of allowance for doubtful accounts of $8 at June 30, 2013 and $9 at December 31, 2012) |
| 523 |
|
| 458 | |
Receivables from affiliated companies |
| 8 |
|
| 5 | |
Inventory |
| 805 |
|
| 828 | |
Other |
| 361 |
|
| 313 | |
| Total current assets |
| 1,717 |
|
| 1,622 |
Investments and Other Assets |
|
|
|
|
| |
Nuclear decommissioning trust funds |
| 1,360 |
|
| 1,259 | |
Other |
| 281 |
|
| 251 | |
| Total investments and other assets |
| 1,641 |
|
| 1,510 |
Property, Plant and Equipment |
|
|
|
|
| |
Cost |
| 21,612 |
|
| 21,168 | |
Cost, variable interest entities |
| 16 |
|
| 16 | |
Accumulated depreciation and amortization |
| (8,379) |
|
| (8,185) | |
Generation facilities to be retired, net |
| 61 |
|
| 63 | |
| Net property, plant and equipment |
| 13,310 |
|
| 13,062 |
Regulatory Assets and Deferred Debits |
|
|
|
|
| |
Regulatory assets |
| 1,905 |
|
| 1,845 | |
Other |
| 32 |
|
| 29 | |
| Total regulatory assets and deferred debits |
| 1,937 |
|
| 1,874 |
Total Assets | $ | 18,605 |
| $ | 18,068 | |
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY |
|
|
|
|
| |
Current Liabilities |
|
|
|
|
| |
Accounts payable | $ | 382 |
| $ | 542 | |
Accounts payable to affiliated companies |
| 103 |
|
| 76 | |
Notes payable to affiliated companies |
| 257 |
|
| 364 | |
Taxes accrued |
| 63 |
|
| 23 | |
Interest accrued |
| 75 |
|
| 69 | |
Current maturities of long-term debt |
| 407 |
|
| 407 | |
Other |
| 451 |
|
| 517 | |
| Total current liabilities |
| 1,738 |
|
| 1,998 |
Long-term Debt |
| 4,929 |
|
| 4,433 | |
Deferred Credits and Other Liabilities |
|
|
|
|
| |
Deferred income taxes |
| 2,305 |
|
| 2,162 | |
Investment tax credits |
| 88 |
|
| 92 | |
Accrued pension and other post-retirement benefit costs |
| 729 |
|
| 715 | |
Asset retirement obligations |
| 1,689 |
|
| 1,649 | |
Regulatory liabilities |
| 1,564 |
|
| 1,538 | |
Other |
| 251 |
|
| 295 | |
| Total deferred credits and other liabilities |
| 6,626 |
|
| 6,451 |
Commitments and Contingencies |
|
|
|
|
| |
Preferred Stock |
| ― |
|
| 59 | |
Common Stockholder's Equity |
|
|
|
|
| |
Common stock, no par value, 200 million shares authorized; 160 million shares issued and outstanding at June 30, 2013 and December 31, 2012 |
| 2,159 |
|
| 2,159 | |
Retained earnings |
| 3,153 |
|
| 2,968 | |
| Total common stockholder's equity |
| 5,312 |
|
| 5,127 |
Total Liabilities and Equity | $ | 18,605 |
| $ | 18,068 | |
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
18
PART I
DUKE ENERGY INDIANA, INC. | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||||||||||
(Unaudited) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
|
| June 30, |
| June 30, | ||||||||
(in millions) | 2012 |
| 2011 |
| 2012 |
| 2011 | ||||||
Operating Revenues-Regulated Electric | $ | 685 |
| $ | 620 |
| $ | 1,373 |
| $ | 1,279 | ||
Operating Expenses | �� |
|
|
|
|
|
|
|
|
|
| ||
| Fuel used in electric generation and purchased power |
| 287 |
|
| 232 |
|
| 570 |
|
| 478 | |
| Operation, maintenance and other |
| 151 |
|
| 163 |
|
| 311 |
|
| 324 | |
| Depreciation and amortization |
| 96 |
|
| 97 |
|
| 192 |
|
| 197 | |
| Property and other taxes |
| 17 |
|
| 19 |
|
| 38 |
|
| 41 | |
| Impairment charges |
| ― |
|
| ― |
|
| 400 |
|
| ― | |
|
| Total operating expenses |
| 551 |
|
| 511 |
|
| 1,511 |
|
| 1,040 |
Operating Income (Loss) |
| 134 |
|
| 109 |
|
| (138) |
|
| 239 | ||
Other Income and Expenses, net |
| 19 |
|
| 21 |
|
| 42 |
|
| 44 | ||
Interest Expense |
| 36 |
|
| 34 |
|
| 70 |
|
| 70 | ||
Income (Loss) Before Income Taxes |
| 117 |
|
| 96 |
|
| (166) |
|
| 213 | ||
Income Tax Expense (Benefit) |
| 40 |
|
| 28 |
|
| (76) |
|
| 69 | ||
Net Income (Loss) |
| 77 |
|
| 68 |
|
| (90) |
|
| 144 | ||
Other Comprehensive Income, net of tax |
|
|
|
|
|
|
|
|
|
|
| ||
| Reclassification into earnings from cash flow hedges(a) |
| ― |
|
| ― |
|
| (1) |
|
| ― | |
Comprehensive Income (Loss) | $ | 77 |
| $ | 68 |
| $ | (91) |
| $ | 144 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Net of insignificant tax benefit for the three and six months ended June 30, 2012. | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUKE ENERGY PROGRESS, INC. | ||||||||
Condensed Consolidated Statements Of Cash Flows | ||||||||
(Unaudited) | ||||||||
| ||||||||
|
|
| Six Months Ended June 30, | |||||
(in millions) | 2013 |
| 2012 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| |||
Net income | $ | 187 |
| $ | 83 | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| |||
| Depreciation, amortization and accretion (including amortization of nuclear fuel) |
| 324 |
|
| 326 | ||
| Equity component of AFUDC |
| (23) |
|
| (32) | ||
| Gains on sales of other assets and other, net |
| ― |
|
| (1) | ||
| Impairment charges |
| 22 |
|
| ― | ||
| Deferred income taxes |
| 146 |
|
| 95 | ||
| Accrued pension and other post-retirement benefit costs |
| 48 |
|
| 33 | ||
| Contributions to qualified pension plans |
| ― |
|
| (22) | ||
| (Increase) decrease in |
|
|
|
|
| ||
|
| Net realized and unrealized mark-to-market and hedging transactions |
| (12) |
|
| (38) | |
|
| Receivables |
| (49) |
|
| (5) | |
|
| Receivables from affiliated companies |
| (3) |
|
| 1 | |
|
| Inventory |
| 23 |
|
| ― | |
|
| Other current assets |
| (69) |
|
| (38) | |
| Increase (decrease) in |
|
|
|
|
| ||
|
| Accounts payable |
| (142) |
|
| 12 | |
|
| Accounts payable to affiliated companies |
| 27 |
|
| 27 | |
|
| Taxes accrued |
| 41 |
|
| 29 | |
|
| Other current liabilities |
| (49) |
|
| 11 | |
| Other assets |
| (53) |
|
| (13) | ||
| Other liabilities |
| 5 |
|
| (18) | ||
| Net cash provided by operating activities |
| 423 |
|
| 450 | ||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| |||
Capital expenditures |
| (725) |
|
| (724) | |||
Purchases of available-for-sale securities |
| (318) |
|
| (271) | |||
Proceeds from sales and maturities of available-for-sale securities |
| 299 |
|
| 256 | |||
Notes receivable from affiliated companies |
| ― |
|
| (229) | |||
Other |
| 3 |
|
| 60 | |||
| Net cash used in investing activities |
| (741) |
|
| (908) | ||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| |||
Proceeds from the issuance of long-term debt |
| 545 |
|
| 988 | |||
Payments for the: |
|
|
|
|
| |||
| Redemption of long-term debt |
| (50) |
|
| (1) | ||
| Redemption of preferred stock |
| (62) |
|
| ― | ||
Notes payable and commercial paper |
| ― |
|
| (188) | |||
Notes payable to affiliated companies |
| (107) |
|
| (31) | |||
Dividends paid to parent |
| ― |
|
| (310) | |||
Dividends paid on preferred stock |
| (1) |
|
| (1) | |||
Other |
| (5) |
|
| 2 | |||
| Net cash provided by financing activities |
| 320 |
|
| 459 | ||
Net increase in cash and cash equivalents |
| 2 |
|
| 1 | |||
Cash and Cash Equivalents at Beginning of Period |
| 18 |
|
| 20 | |||
Cash and Cash Equivalents at End of Period | $ | 20 |
| $ | 21 | |||
Supplemental Disclosures: |
|
|
|
|
| |||
Significant non-cash transactions: |
|
|
|
|
| |||
| Accrued capital expenditures | $ | 216 |
| $ | 162 | ||
| Capital expenditures financed through capital leases |
| ― |
|
| 116 | ||
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
19
PART I
DUKE ENERGY INDIANA, INC. | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
|
|
|
|
|
|
|
|
| June 30, |
| December 31, | ||
(in millions) | 2012 |
| 2011 | |||
ASSETS |
|
|
|
|
| |
Current Assets |
|
|
|
|
| |
Cash and cash equivalents | $ | 19 |
| $ | 16 | |
Receivables (net of allowance for doubtful accounts of $1 at June 30, 2012 and December 31, 2011) |
| 190 |
|
| 198 | |
Inventory |
| 358 |
|
| 330 | |
Other |
| 107 |
|
| 135 | |
| Total current assets |
| 674 |
|
| 679 |
Investments and Other Assets |
|
|
|
|
| |
Intangibles, net |
| 44 |
|
| 50 | |
Other |
| 111 |
|
| 113 | |
| Total investments and other assets |
| 155 |
|
| 163 |
Property, Plant and Equipment |
|
|
|
|
| |
Cost |
| 11,880 |
|
| 11,791 | |
Accumulated depreciation and amortization |
| (3,575) |
|
| (3,393) | |
| Net property, plant and equipment |
| 8,305 |
|
| 8,398 |
Regulatory Assets and Deferred Debits |
|
|
|
|
| |
Regulatory assets |
| 781 |
|
| 798 | |
Other |
| 24 |
|
| 24 | |
| Total regulatory assets and deferred debits |
| 805 |
|
| 822 |
Total Assets | $ | 9,939 |
| $ | 10,062 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUKE ENERGY PROGRESS, INC. | |||||||||||||
Condensed Consolidated Statements Of Equity | |||||||||||||
(Unaudited) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Other Comprehensive Loss |
|
|
| |
(in millions) |
| Common Stock |
| Retained Earnings |
| Net Losses on Cash Flow Hedges |
| Total Equity | |||||
Balance at December 31, 2011 |
| $ | 2,148 |
| $ | 3,011 |
| $ | (71) |
| $ | 5,088 | |
Net income |
|
| ― |
|
| 83 |
|
| ― |
|
| 83 | |
Other comprehensive loss |
|
| ― |
|
| ― |
|
| (1) |
|
| (1) | |
Stock-based compensation expense |
|
| 11 |
|
| ― |
|
| ― |
|
| 11 | |
Dividend to parent |
|
| ― |
|
| (310) |
|
| ― |
|
| (310) | |
Preferred stock dividends at stated rate |
|
| ― |
|
| (1) |
|
| ― |
|
| (1) | |
Tax dividend |
|
| ― |
|
| (3) |
|
| ― |
|
| (3) | |
Balance at June 30, 2012 |
| $ | 2,159 |
| $ | 2,780 |
| $ | (72) |
| $ | 4,867 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 |
| $ | 2,159 |
| $ | 2,968 |
| $ | ― |
| $ | 5,127 | |
Net income |
|
| ― |
|
| 187 |
|
| ― |
|
| 187 | |
Premium on the redemption of preferred stock |
|
| ― |
|
| (2) |
|
| ― |
|
| (2) | |
Balance at June 30, 2013 |
| $ | 2,159 |
| $ | 3,153 |
| $ | ― |
| $ | 5,312 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
20
PART I
DUKE ENERGY INDIANA, INC. | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued) | ||||||
(Unaudited) | ||||||
|
|
|
|
|
|
|
|
| June 30, |
| December 31, | ||
(in millions, except share and per-share amounts) | 2012 |
| 2011 | |||
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY |
|
|
|
|
| |
Current Liabilities |
|
|
|
|
| |
Accounts payable | $ | 209 |
| $ | 273 | |
Notes payable |
| 113 |
|
| 300 | |
Taxes accrued |
| 50 |
|
| 74 | |
Interest accrued |
| 55 |
|
| 50 | |
Current maturities of long-term debt |
| 5 |
|
| 6 | |
Other |
| 132 |
|
| 93 | |
| Total current liabilities |
| 564 |
|
| 796 |
Long-term Debt |
| 3,702 |
|
| 3,453 | |
Deferred Credits and Other Liabilities |
|
|
|
|
| |
Deferred income taxes |
| 835 |
|
| 927 | |
Investment tax credits |
| 142 |
|
| 143 | |
Accrued pension and other post-retirement benefit costs |
| 154 |
|
| 161 | |
Asset retirement obligations |
| 44 |
|
| 43 | |
Regulatory liabilities |
| 695 |
|
| 683 | |
Other |
| 134 |
|
| 122 | |
| Total deferred credits and other liabilities |
| 2,004 |
|
| 2,079 |
Commitments and Contingencies |
|
|
|
|
| |
Common Stockholder's Equity |
|
|
|
|
| |
Common Stock, no par; $0.01 stated value, 60,000,000 shares authorized; 53,913,701 shares outstanding at June 30, 2012 and December 31, 2011 |
| 1 |
|
| 1 | |
Additional paid-in capital |
| 1,384 |
|
| 1,358 | |
Retained earnings |
| 2,278 |
|
| 2,368 | |
Accumulated other comprehensive income |
| 6 |
|
| 7 | |
| Total common stockholder's equity |
| 3,669 |
|
| 3,734 |
Total Liabilities and Common Stockholder's Equity | $ | 9,939 |
| $ | 10,062 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUKE ENERGY FLORIDA, INC. | ||||||||||||||
Condensed Statements Of Operations And Comprehensive Income | ||||||||||||||
(Unaudited) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
(in millions) | 2013 |
| 2012 |
| 2013 |
| 2012 | |||||||
Operating Revenues |
| $ | 1,142 |
| $ | 1,196 |
|
| $ | 2,110 |
| $ | 2,206 | |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fuel used in electric generation and purchased power |
|
| 478 |
|
| 568 |
|
|
| 883 |
|
| 1,050 | |
Operation, maintenance and other |
|
| 198 |
|
| 251 |
|
|
| 409 |
|
| 415 | |
Depreciation and amortization |
|
| 90 |
|
| 92 |
|
|
| 142 |
|
| 119 | |
Property and other taxes |
|
| 85 |
|
| 89 |
|
|
| 164 |
|
| 172 | |
Impairment charges |
|
| 345 |
|
| ― |
|
|
| 345 |
|
| ― | |
| Total operating expenses |
|
| 1,196 |
|
| 1,000 |
|
|
| 1,943 |
|
| 1,756 |
Gains on Sales of Other Assets and Other, net |
|
| 1 |
|
| ― |
|
|
| 1 |
|
| 1 | |
Operating (Loss) Income |
|
| (53) |
|
| 196 |
|
|
| 168 |
|
| 451 | |
Other Income and Expenses, net |
|
| 5 |
|
| 9 |
|
|
| 13 |
|
| 18 | |
Interest Expense |
|
| 43 |
|
| 69 |
|
|
| 92 |
|
| 132 | |
Income (Loss) Before Income Taxes |
|
| (91) |
|
| 136 |
|
|
| 89 |
|
| 337 | |
Income Tax (Benefit) Expense |
|
| (34) |
|
| 53 |
|
|
| 36 |
|
| 126 | |
Net (Loss) Income |
|
| (57) |
|
| 83 |
|
|
| 53 |
|
| 211 | |
Less: Preferred Stock Dividend Requirement |
|
| ― |
|
| ― |
|
|
| ― |
|
| 1 | |
Net (Loss) Income Available to Parent |
| $ | (57) |
| $ | 83 |
|
| $ | 53 |
| $ | 210 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income |
| $ | (57) |
| $ | 83 |
|
| $ | 53 |
| $ | 211 | |
Other Comprehensive (Loss) Income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net unrealized loss on cash flow hedges |
|
| ― |
|
| (1) |
|
|
| ― |
|
| ― | |
Comprehensive (Loss) Income |
| $ | (57) |
| $ | 82 |
|
| $ | 53 |
| $ | 211 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
21
PART I
DUKE ENERGY INDIANA, INC. | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
| |||||||||
|
|
|
|
| Six Months Ended | ||||
|
|
|
|
| June 30, | ||||
(in millions) | 2012 |
| 2011 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| ||||
| Net (loss) income | $ | (90) |
| $ | 144 | |||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
| |||
|
|
| Depreciation and amortization |
| 195 |
|
| 200 | |
|
|
| Equity component of AFUDC |
| (39) |
|
| (39) | |
|
|
| Impairment charges |
| 400 |
|
| ― | |
|
|
| Deferred income taxes and investment tax credit amortization |
| (73) |
|
| 39 | |
|
|
| Accrued pension and other post-retirement benefit costs |
| 8 |
|
| 11 | |
|
|
| (Increase) decrease in |
|
|
|
|
| |
|
|
|
| Receivables |
| 8 |
|
| 89 |
|
|
|
| Inventory |
| (28) |
|
| (31) |
|
|
|
| Other current assets |
| 19 |
|
| 6 |
|
|
| Increase (decrease) in |
|
|
|
|
| |
|
|
|
| Accounts payable |
| ― |
|
| (9) |
|
|
|
| Taxes accrued |
| (25) |
|
| ― |
|
|
|
| Other current liabilities |
| 17 |
|
| (4) |
|
|
| Other assets |
| 26 |
|
| 15 | |
|
|
| Other liabilities |
| (35) |
|
| (27) | |
|
|
|
| Net cash provided by operating activities |
| 383 |
|
| 394 |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| ||||
| Capital expenditures |
| (439) |
|
| (512) | |||
| Purchases of available-for-sale securities |
| (8) |
|
| (2) | |||
| Proceeds from sales and maturities of available-for-sale securities |
| 10 |
|
| 1 | |||
| Notes due from affiliate |
| ― |
|
| 85 | |||
| Change in restricted cash |
| ― |
|
| 4 | |||
| Other |
| (2) |
|
| (3) | |||
|
|
|
| Net cash used in investing activities |
| (439) |
|
| (427) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| ||||
| Proceeds from the issuance of long-term debt |
| 250 |
|
| ― | |||
| Payments for the redemption of long-term debt |
| (2) |
|
| (2) | |||
| Notes payable to affiliate |
| (187) |
|
| ― | |||
| Other |
| (2) |
|
| ― | |||
|
|
|
| Net cash provided by (used in) financing activities |
| 59 |
|
| (2) |
| Net increase (decrease) in cash and cash equivalents |
| 3 |
|
| (35) | |||
| Cash and cash equivalents at beginning of period |
| 16 |
|
| 54 | |||
| Cash and cash equivalents at end of period | $ | 19 |
| $ | 19 | |||
| Supplemental Disclosures: |
|
|
|
|
| |||
| Significant non-cash transactions: |
|
|
|
|
| |||
|
| Accrued capital expenditures | $ | 46 |
| $ | 143 | ||
|
| Transfer of Vermillion Generating Station from Duke Energy Ohio | $ | 26 |
| $ | ― | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUKE ENERGY FLORIDA, INC. | ||||||
Condensed Balance Sheets | ||||||
(Unaudited) | ||||||
|
|
|
|
|
|
|
(in millions) | June 30, 2013 |
| December 31, 2012 | |||
ASSETS |
|
|
|
|
| |
Current Assets |
|
|
|
|
| |
Cash and cash equivalents | $ | 18 |
| $ | 131 | |
Receivables (net of allowance for doubtful accounts of $7 at June 30, 2013 and December 31, 2012) |
| 402 |
|
| 318 | |
Receivables from affiliated companies |
| ― |
|
| 20 | |
Notes receivable from affiliated companies |
| ― |
|
| 207 | |
Inventory |
| 569 |
|
| 613 | |
Other |
| 318 |
|
| 351 | |
| Total current assets |
| 1,307 |
|
| 1,640 |
Investments and Other Assets |
|
|
|
|
| |
Nuclear decommissioning trust funds |
| 674 |
|
| 629 | |
Other |
| 173 |
|
| 182 | |
| Total investments and other assets |
| 847 |
|
| 811 |
Property, Plant and Equipment |
|
|
|
|
| |
Cost |
| 13,555 |
|
| 13,432 | |
Accumulated depreciation and amortization |
| (4,130) |
|
| (4,072) | |
| Net property, plant and equipment |
| 9,425 |
|
| 9,360 |
Regulatory Assets and Deferred Debits |
|
|
|
|
| |
Regulatory assets |
| 3,167 |
|
| 3,321 | |
Other |
| 46 |
|
| 48 | |
| Total regulatory assets and deferred debits |
| 3,213 |
|
| 3,369 |
Total Assets | $ | 14,792 |
| $ | 15,180 | |
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY |
|
|
|
|
| |
Current Liabilities |
|
|
|
|
| |
Accounts payable | $ | 392 |
| $ | 412 | |
Accounts payable to affiliated companies |
| 41 |
|
| 44 | |
Notes payable to affiliated companies |
| 11 |
|
| ― | |
Taxes accrued |
| 175 |
|
| 48 | |
Interest accrued |
| 45 |
|
| 55 | |
Current maturities of long-term debt |
| 11 |
|
| 435 | |
Other |
| 774 |
|
| 534 | |
| Total current liabilities |
| 1,449 |
|
| 1,528 |
Long-term Debt |
| 4,881 |
|
| 4,885 | |
Deferred Credits and Other Liabilities |
|
|
|
|
| |
Deferred income taxes |
| 1,567 |
|
| 1,518 | |
Accrued pension and other post-retirement benefit costs |
| 610 |
|
| 610 | |
Asset retirement obligations |
| 774 |
|
| 764 | |
Regulatory liabilities |
| 669 |
|
| 787 | |
Other |
| 216 |
|
| 255 | |
| Total deferred credits and other liabilities |
| 3,836 |
|
| 3,934 |
Commitments and Contingencies |
|
|
|
|
| |
Preferred Stock |
| ― |
|
| 34 | |
Common Stockholder's Equity |
|
|
|
|
| |
Common Stock, no par; 60,000,000 shares authorized; 100 issued and outstanding at June 30, 2013 and December 31, 2012 |
| 1,762 |
|
| 1,762 | |
Retained earnings |
| 2,864 |
|
| 3,037 | |
| Total common stockholder's equity |
| 4,626 |
|
| 4,799 |
Total Liabilities and Common Stockholder's Equity | $ | 14,792 |
| $ | 15,180 | |
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
22
PART I
DUKE ENERGY INDIANA, INC. | ||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Comprehensive |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (Loss) |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Net Gains |
|
|
| ||||
|
|
|
|
| Additional |
|
|
|
| (Losses) on |
|
|
| |||||
|
| Common |
| Paid-in |
| Retained |
| Cash Flow |
|
|
| |||||||
(in millions) |
| Stock |
| Capital |
| Earnings |
| Hedges |
| Total | ||||||||
Balance at December 31, 2010 |
| $ | 1 |
| $ | 1,358 |
| $ | 2,200 |
| $ | 8 |
| $ | 3,567 | |||
| Net income |
|
| ― |
|
| ― |
|
| 144 |
|
| ― |
|
| 144 | ||
Balance at June 30, 2011 |
| $ | 1 |
| $ | 1,358 |
| $ | 2,344 |
| $ | 8 |
| $ | 3,711 | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011 |
| $ | 1 |
| $ | 1,358 |
| $ | 2,368 |
| $ | 7 |
| $ | 3,734 | |||
| Net loss |
|
| ― |
|
| ― |
|
| (90) |
|
| ― |
|
| (90) | ||
| Other comprehensive loss |
|
| ― |
|
| ― |
|
| ― |
|
| (1) |
|
| (1) | ||
| Transfer of Vermillion Generating Station from Duke Energy Ohio |
|
| ― |
|
| 26 |
|
| ― |
|
| ― |
|
| 26 | ||
Balance at June 30, 2012 |
| $ | 1 |
| $ | 1,384 |
| $ | 2,278 |
| $ | 6 |
| $ | 3,669 | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
DUKE ENERGY FLORIDA, INC. | ||||||||
Condensed Statements Of Cash Flows | ||||||||
(Unaudited) | ||||||||
| ||||||||
|
|
| Six Months Ended June 30, | |||||
(in millions) | 2013 |
| 2012 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| |||
Net income | $ | 53 |
| $ | 211 | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| |||
| Depreciation, amortization and accretion |
| 145 |
|
| 121 | ||
| Equity component of AFUDC |
| (4) |
|
| (17) | ||
| Gains on sales of other assets and other, net |
| (1) |
|
| (1) | ||
| Impairment charges |
| 345 |
|
| ― | ||
| Deferred income taxes |
| 34 |
|
| 74 | ||
| Accrued pension and other post-retirement benefit costs |
| 43 |
|
| 33 | ||
| Contributions to qualified pension plans |
| ― |
|
| (20) | ||
| (Increase) decrease in |
|
|
|
|
| ||
|
| Net realized and unrealized mark-to-market and hedging transactions |
| 33 |
|
| 21 | |
|
| Receivables |
| (85) |
|
| (12) | |
|
| Receivables from affiliated companies |
| 20 |
|
| (9) | |
|
| Inventory |
| 44 |
|
| 7 | |
|
| Other current assets |
| (44) |
|
| (58) | |
| Increase (decrease) in |
|
|
|
|
| ||
|
| Accounts payable |
| 26 |
|
| 44 | |
|
| Accounts payable to affiliated companies |
| (3) |
|
| 17 | |
|
| Taxes accrued |
| 127 |
|
| 81 | |
|
| Other current liabilities |
| 232 |
|
| (31) | |
| Other assets |
| (76) |
|
| 19 | ||
| Other liabilities |
| 23 |
|
| (80) | ||
| Net cash provided by operating activities |
| 912 |
|
| 400 | ||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| |||
Capital expenditures |
| (564) |
|
| (376) | |||
Purchases of available-for-sale securities |
| (661) |
|
| (353) | |||
Proceeds from sales and maturities of available-for-sale securities |
| 661 |
|
| 353 | |||
Notes receivable from affiliated companies |
| 207 |
|
| ― | |||
Other |
| 9 |
|
| 6 | |||
| Net cash used in investing activities |
| (348) |
|
| (370) | ||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| |||
Payments for the: |
|
|
|
|
| |||
| Redemption of long-term debt |
| (429) |
|
| (4) | ||
| Redemption of preferred stock |
| (34) |
|
| ― | ||
Payments of short-term debt with original maturities greater than 90 days |
| ― |
|
| (65) | |||
Proceeds from issuance of short-term debt with original maturities greater than 90 days |
| ― |
|
| 65 | |||
Notes payable and commercial paper |
| ― |
|
| (89) | |||
Notes payable to affiliated companies |
| 11 |
|
| 234 | |||
Dividends paid to parent |
| (225) |
|
| (170) | |||
Dividends paid on preferred stock |
| ― |
|
| (1) | |||
Other |
| ― |
|
| 3 | |||
| Net cash used in financing activities |
| (677) |
|
| (27) | ||
Net (decrease) increase in cash and cash equivalents |
| (113) |
|
| 3 | |||
Cash and Cash Equivalents at Beginning of Period |
| 131 |
|
| 16 | |||
Cash and Cash Equivalents at End of Period | $ | 18 |
| $ | 19 | |||
Supplemental Disclosures: |
|
|
|
|
| |||
Significant non-cash transactions: |
|
|
|
|
| |||
| Accrued capital expenditures | $ | 93 |
| $ | 99 | ||
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
23
PART I
DUKE ENERGY FLORIDA, INC. | |||||||||||||
Condensed Statements Of Equity | |||||||||||||
(Unaudited) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Other Comprehensive Loss |
|
|
| |
(in millions) |
| Common Stock |
| Retained Earnings |
| Net Losses on Cash Flow Hedges |
| Total | |||||
Balance at December 31, 2011 |
| $ | 1,757 |
| $ | 2,945 |
| $ | (27) |
| $ | 4,675 | |
Net income |
|
| ― |
|
| 211 |
|
| ― |
|
| 211 | |
Stock-based compensation expense |
|
| 5 |
|
| ― |
|
| ― |
|
| 5 | |
Dividend to parent |
|
| ― |
|
| (170) |
|
| ― |
|
| (170) | |
Preferred stock dividends at stated rate |
|
| ― |
|
| (1) |
|
| ― |
|
| (1) | |
Tax dividend |
|
| ― |
|
| (2) |
|
| ― |
|
| (2) | |
Balance at June 30, 2012 |
| $ | 1,762 |
| $ | 2,983 |
| $ | (27) |
| $ | 4,718 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 |
| $ | 1,762 |
| $ | 3,037 |
| $ | ― |
| $ | 4,799 | |
Net income |
|
| ― |
|
| 53 |
|
| ― |
|
| 53 | |
Dividend to parent |
|
| ― |
|
| (225) |
|
| ― |
|
| (225) | |
Premium on the redemption of preferred stock |
|
| ― |
|
| (1) |
|
| ― |
|
| (1) | |
Balance at June 30, 2013 |
| $ | 1,762 |
| $ | 2,864 |
| $ | ― |
| $ | 4,626 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements
24
PART I
Index to Combined Notes To Unaudited Condensed Consolidated Financial Statements | |||||||||||||||||||||
|
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|
| The unaudited notes to the condensed consolidated financial statements that follow are a combined presentation. The following | ||||||||||||||||||||
list indicates the registrants to which the footnotes apply: | |||||||||||||||||||||
|
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|
|
| Applicable Notes | ||||||||||||||||||
Registrant |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | |
Duke Energy Corporation |
| • | • | • | • | • | • | • | • | • | • | • | • | • | • | • | • |
| • | • | |
|
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|
|
|
|
|
|
| |
Duke Energy Carolinas, LLC |
| • | • | • | • | • | • |
| • | • | • | • |
|
| • | • | • | • | • | • | |
|
|
|
|
|
|
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|
| |
Duke Energy Ohio, Inc. |
| • | • | • | • | • | • | • | • | • |
| • |
|
| • | • | • | • | • | • | |
|
|
|
|
|
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|
| |
Duke Energy Indiana, Inc. |
| • | • | • | • | • | • |
| • | • | • | • |
|
| • | • | • | • | • | • |
DUKE ENERGY OHIO, INC. | ||||||||||||||
Condensed Consolidated Statements Of Operations And Comprehensive Income | ||||||||||||||
(Unaudited) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
(in millions) | 2013 |
| 2012 |
| 2013 |
| 2012 | |||||||
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Regulated electric |
| $ | 339 |
| $ | 336 |
|
| $ | 672 |
| $ | 660 | |
Nonregulated electric and other |
|
| 378 |
|
| 299 |
|
|
| 606 |
|
| 716 | |
Regulated natural gas |
|
| 94 |
|
| 82 |
|
|
| 280 |
|
| 253 | |
| Total operating revenues |
|
| 811 |
|
| 717 |
|
|
| 1,558 |
|
| 1,629 |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fuel used in electric generation and purchased power - regulated |
|
| 103 |
|
| 120 |
|
|
| 206 |
|
| 234 | |
Fuel used in electric generation and purchased power - nonregulated |
|
| 222 |
|
| 176 |
|
|
| 462 |
|
| 415 | |
Cost of natural gas |
|
| 17 |
|
| 12 |
|
|
| 93 |
|
| 87 | |
Operation, maintenance and other |
|
| 212 |
|
| 175 |
|
|
| 397 |
|
| 371 | |
Depreciation and amortization |
|
| 89 |
|
| 80 |
|
|
| 177 |
|
| 163 | |
Property and other taxes |
|
| 64 |
|
| 60 |
|
|
| 136 |
|
| 128 | |
| Total operating expenses |
|
| 707 |
|
| 623 |
|
|
| 1,471 |
|
| 1,398 |
Gains on Sales of Other Assets and Other, net |
|
| 4 |
|
| 1 |
|
|
| 4 |
|
| 2 | |
Operating Income |
|
| 108 |
|
| 95 |
|
|
| 91 |
|
| 233 | |
Other Income and Expenses, net |
|
| 1 |
|
| 4 |
|
|
| 3 |
|
| 8 | |
Interest Expense |
|
| 18 |
|
| 25 |
|
|
| 36 |
|
| 49 | |
Income Before Income Taxes |
|
| 91 |
|
| 74 |
|
|
| 58 |
|
| 192 | |
Income Tax Expense |
|
| 33 |
|
| 29 |
|
|
| 21 |
|
| 73 | |
Net Income |
|
| 58 |
|
| 45 |
|
|
| 37 |
|
| 119 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Pension and OPEB adjustments |
|
| ― |
|
| ― |
|
|
| 1 |
|
| 1 | |
Comprehensive Income |
| $ | 58 |
| $ | 45 |
|
| $ | 38 |
| $ | 120 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements
25
PART I
DUKE ENERGY OHIO, INC. | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(Unaudited) | ||||||||
|
|
|
|
|
|
| ||
(in millions) | June 30, 2013 |
| December 31, 2012 | |||||
ASSETS |
|
|
|
|
| |||
Current Assets |
|
|
|
|
| |||
Cash and cash equivalents | $ | 15 |
| $ | 31 | |||
Receivables (net of allowance for doubtful accounts of $2 at June 30, 2013 and December 31, 2012) |
| 128 |
|
| 108 | |||
Receivables from affiliated companies |
| 90 |
|
| 82 | |||
Notes receivable from affiliated companies |
| 19 |
|
| 1 | |||
Inventory |
| 206 |
|
| 227 | |||
Other |
| 279 |
|
| 267 | |||
| Total current assets | 737 |
|
| 716 | |||
Investments and Other Assets |
|
|
|
|
| |||
Goodwill |
| 920 |
|
| 921 | |||
Intangibles, net |
| 122 |
|
| 129 | |||
Other |
| 80 |
|
| 75 | |||
| Total investments and other assets |
| 1,122 |
|
| 1,125 | ||
Property, Plant and Equipment |
|
|
|
|
| |||
Cost |
| 10,970 |
|
| 10,824 | |||
Accumulated depreciation and amortization |
| (2,800) |
|
| (2,698) | |||
| Net property, plant and equipment |
| 8,170 |
|
| 8,126 | ||
Regulatory Assets and Deferred Debits |
|
|
|
|
| |||
Regulatory assets |
| 564 |
|
| 579 | |||
Other |
| 13 |
|
| 14 | |||
| Total regulatory assets and deferred debits |
| 577 |
|
| 593 | ||
Total Assets | $ | 10,606 |
| $ | 10,560 | |||
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY |
|
|
|
|
| |||
Current Liabilities |
|
|
|
|
| |||
Accounts payable | $ | 265 |
| $ | 318 | |||
Accounts payable to affiliated companies |
| 58 |
|
| 62 | |||
Notes payable to affiliated companies |
| 602 |
|
| 245 | |||
Taxes accrued |
| 114 |
|
| 159 | |||
Interest accrued |
| 14 |
|
| 14 | |||
Current maturities of long-term debt |
| 8 |
|
| 261 | |||
Other |
| 123 |
|
| 126 | |||
| Total current liabilities |
| 1,184 |
|
| 1,185 | ||
Long-term Debt |
| 1,734 |
|
| 1,736 | |||
Deferred Credits and Other Liabilities |
|
|
|
|
| |||
Deferred income taxes |
| 1,860 |
|
| 1,853 | |||
Investment tax credits |
| 6 |
|
| 6 | |||
Accrued pension and other post-retirement benefit costs |
| 154 |
|
| 157 | |||
Asset retirement obligations |
| 29 |
|
| 28 | |||
Regulatory liabilities |
| 256 |
|
| 254 | |||
Other |
| 179 |
|
| 175 | |||
| Total deferred credits and other liabilities | 2,484 |
|
| 2,473 | |||
Commitments and Contingencies |
|
|
|
|
| |||
Common Stockholder's Equity |
|
|
|
|
| |||
Common stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at June 30, 2013 and December 31, 2012 |
| 762 |
|
| 762 | |||
Additional paid-in capital |
| 4,882 |
|
| 4,882 | |||
Accumulated deficit |
| (440) |
|
| (477) | |||
Accumulated other comprehensive loss |
| ― |
|
| (1) | |||
| Total common stockholder's equity | 5,204 |
|
| 5,166 | |||
Total Liabilities and Common Stockholder's Equity | $ | 10,606 |
| $ | 10,560 | |||
|
|
|
|
|
|
| ||
See Notes to Condensed Consolidated Financial Statements
26
PART I
DUKE ENERGY OHIO, INC. | |||||||||||||||||||
Condensed Consolidated Statements Of Cash Flows | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||
|
|
| Six Months Ended June 30, | ||||||||||||||||
(in millions) |
| 2013 |
|
| 2012 | ||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| ||||||||||||||
Net income | $ | 37 |
| $ | 119 | ||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||||||||||||||
| Depreciation and amortization |
| 179 |
|
| 165 | |||||||||||||
| Gains on sales of other assets and other, net |
| (4) |
|
| (2) | |||||||||||||
| Deferred income taxes |
| 15 |
|
| 69 | |||||||||||||
| Accrued pension and other post-retirement benefit costs |
| 9 |
|
| 6 | |||||||||||||
| (Increase) decrease in |
|
|
|
|
| |||||||||||||
|
| Net realized and unrealized mark-to-market and hedging transactions |
| 22 |
|
| (11) | ||||||||||||
|
| Receivables |
| (19) |
|
| 18 | ||||||||||||
|
| Receivables from affiliated companies |
| (8) |
|
| 33 | ||||||||||||
|
| Inventory |
| 21 |
|
| (20) | ||||||||||||
|
| Other current assets |
| (19) |
|
| 29 | ||||||||||||
| Increase (decrease) in |
|
|
|
|
| |||||||||||||
|
| Accounts payable |
| (36) |
|
| (22) | ||||||||||||
|
| Accounts payable to affiliated companies |
| (4) |
|
| (11) | ||||||||||||
|
| Taxes accrued |
| (49) |
|
| (22) | ||||||||||||
|
| Other current liabilities |
| (2) |
|
| (14) | ||||||||||||
| Other assets |
| (9) |
|
| (11) | |||||||||||||
| Other liabilities |
| (23) |
|
| (75) | |||||||||||||
| Net cash provided by operating activities |
| 110 |
|
| 251 | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| ||||||||||||||
Capital expenditures |
| (222) |
|
| (252) | ||||||||||||||
Net proceeds from the sales of other assets |
| 11 |
|
| 82 | ||||||||||||||
Notes receivable from affiliated companies |
| (18) |
|
| (130) | ||||||||||||||
Change in restricted cash |
| ― |
|
| (25) | ||||||||||||||
Other |
| ― |
|
| 1 | ||||||||||||||
| Net cash used in investing activities |
| (229) |
|
| (324) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| ||||||||||||||
Payments for the redemption of long-term debt |
| (253) |
|
| (4) | ||||||||||||||
Notes payable to affiliated companies |
| 357 |
|
| ― | ||||||||||||||
Other |
| (1) |
|
| ― | ||||||||||||||
| Net cash provided by (used in) financing activities |
| 103 |
|
| (4) | |||||||||||||
Net decrease in cash and cash equivalents |
| (16) |
|
| (77) | ||||||||||||||
Cash and cash equivalents at beginning of period |
| 31 |
|
| 99 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 15 |
| $ | 22 | ||||||||||||||
Supplemental Disclosures: |
|
|
|
|
| ||||||||||||||
Significant non-cash transactions: |
|
|
|
|
| ||||||||||||||
| Accrued capital expenditures | $ | 18 |
| $ | 37 | |||||||||||||
| Transfer of Vermillion Generating Station to Duke Energy Indiana |
| ― |
|
| 28 | |||||||||||||
|
|
|
|
|
|
|
| ||||||||||||
See Notes to Condensed Consolidated Financial Statements
27
PART I
DUKE ENERGY OHIO, INC. | |||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Statements Of Equity | |||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Accumulated Other Comprehensive Loss |
|
| |||||||||||||||||||||||||||||||
(in millions) |
| Common Stock |
| Additional Paid-in Capital |
| Accumulated Deficit |
| Pension and OPEB Related Adjustments |
| Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2011 |
| $ | 762 |
| $ | 5,085 |
| $ | (652) |
| $ | (28) |
| $ | 5,167 | ||||||||||||||||||||||||||
Net income |
|
| ― |
|
| ― |
|
| 119 |
|
| ― |
|
| 119 | ||||||||||||||||||||||||||
Other comprehensive income |
|
| ― |
|
| ― |
|
| ― |
|
| 1 |
|
| 1 | ||||||||||||||||||||||||||
Transfer of Vermillion Generating Station to Duke Energy Indiana |
|
| ― |
|
| (28) |
|
| ― |
|
| ― |
|
| (28) | ||||||||||||||||||||||||||
Balance at June 30, 2012 |
| $ | 762 |
| $ | 5,057 |
| $ | (533) |
| $ | (27) |
| $ | 5,259 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Balance at December 31, 2012 |
| $ | 762 |
| $ | 4,882 |
| $ | (477) |
| $ | (1) |
| $ | 5,166 | ||||||||||||||||||||||||||
Net income |
|
| ― |
|
| ― |
|
| 37 |
|
| ― |
|
| 37 | ||||||||||||||||||||||||||
Other comprehensive income |
|
| ― |
|
| ― |
|
| ― |
|
| 1 |
|
| 1 | ||||||||||||||||||||||||||
Balance at June 30, 2013 |
| $ | 762 |
| $ | 4,882 |
| $ | (440) |
| $ | ― |
| $ | 5,204 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
28
PART I
DUKE ENERGY INDIANA, INC. | ||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Statements Of Operations And Comprehensive Income | ||||||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| 2013 |
| 2012 | |||||||||||||||||||||||||||||||||
Operating Revenues |
| $ | 700 |
| $ | 685 |
|
| $ | 1,424 |
| $ | 1,373 | |||||||||||||||||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Fuel used in electric generation and purchased power |
|
| 276 |
|
| 287 |
|
|
| 569 |
|
| 570 | |||||||||||||||||||||||||||
Operation, maintenance and other |
|
| 163 |
|
| 151 |
|
|
| 313 |
|
| 311 | |||||||||||||||||||||||||||
Depreciation and amortization |
|
| 77 |
|
| 96 |
|
|
| 155 |
|
| 192 | |||||||||||||||||||||||||||
Property and other taxes |
|
| 16 |
|
| 17 |
|
|
| 38 |
|
| 38 | |||||||||||||||||||||||||||
Impairment charges |
|
| ― |
|
| ― |
|
|
| ― |
|
| 400 | |||||||||||||||||||||||||||
| Total operating expenses |
|
| 532 |
|
| 551 |
|
|
| 1,075 |
|
| 1,511 | ||||||||||||||||||||||||||
Operating Income (Loss) |
|
| 168 |
|
| 134 |
|
|
| 349 |
|
| (138) | |||||||||||||||||||||||||||
Other Income and Expenses, net |
|
| 6 |
|
| 19 |
|
|
| 10 |
|
| 42 | |||||||||||||||||||||||||||
Interest Expense |
|
| 43 |
|
| 36 |
|
|
| 84 |
|
| 70 | |||||||||||||||||||||||||||
Income (Loss) Before Income Taxes |
|
| 131 |
|
| 117 |
|
|
| 275 |
|
| (166) | |||||||||||||||||||||||||||
Income Tax Expense (Benefit) |
|
| 49 |
|
| 40 |
|
|
| 103 |
|
| (76) | |||||||||||||||||||||||||||
Net Income (Loss) |
|
| 82 |
|
| 77 |
|
|
| 172 |
|
| (90) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Other Comprehensive Loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Reclassification into earnings from cash flow hedges |
|
| (1) |
|
| ― |
|
|
| (1) |
|
| (1) | |||||||||||||||||||||||||||
Comprehensive Income (Loss) |
| $ | 81 |
| $ | 77 |
|
| $ | 171 |
| $ | (91) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
29
PART I
DUKE ENERGY INDIANA, INC. | |||||||||||||||
Condensed Consolidated Balance Sheets | |||||||||||||||
(Unaudited) | |||||||||||||||
|
|
|
|
|
|
| |||||||||
(in millions) | June 30, 2013 |
| December 31, 2012 | ||||||||||||
ASSETS |
|
|
|
|
| ||||||||||
Current Assets |
|
|
|
|
| ||||||||||
Cash and cash equivalents | $ | 8 |
| $ | 36 | ||||||||||
Receivables (net of allowance for doubtful accounts of $1 at June 30, 2013 and December 31, 2012) |
| 32 |
|
| 33 | ||||||||||
Receivables from affiliated companies |
| 110 |
|
| 104 | ||||||||||
Notes receivable from affiliated companies |
| 21 |
|
| ― | ||||||||||
Inventory |
| 397 |
|
| 380 | ||||||||||
Other |
| 160 |
|
| 138 | ||||||||||
| Total current assets | 728 |
|
| 691 | ||||||||||
Investments and Other Assets |
|
|
|
|
| ||||||||||
Intangibles, net |
| 35 |
|
| 41 | ||||||||||
Other |
| 124 |
|
| 122 | ||||||||||
| Total investments and other assets |
| 159 |
|
| 163 | |||||||||
Property, Plant and Equipment |
|
|
|
|
| ||||||||||
Cost |
| 12,213 |
|
| 12,012 | ||||||||||
Accumulated depreciation and amortization |
| (3,768) |
|
| (3,692) | ||||||||||
| Net property, plant and equipment |
| 8,445 |
|
| 8,320 | |||||||||
Regulatory Assets and Deferred Debits |
|
|
|
|
| ||||||||||
Regulatory assets |
| 769 |
|
| 810 | ||||||||||
Other |
| 23 |
|
| 24 | ||||||||||
| Total regulatory assets and deferred debits |
| 792 |
|
| 834 | |||||||||
Total Assets | $ | 10,124 |
| $ | 10,008 | ||||||||||
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY |
|
|
|
|
| ||||||||||
Current Liabilities |
|
|
|
|
| ||||||||||
Accounts payable | $ | 134 |
| $ | 173 | ||||||||||
Accounts payable to affiliated companies |
| 47 |
|
| 60 | ||||||||||
Notes payable to affiliated companies |
| ― |
|
| 81 | ||||||||||
Taxes accrued |
| 52 |
|
| 61 | ||||||||||
Interest accrued |
| 55 |
|
| 53 | ||||||||||
Current maturities of long-term debt |
| 5 |
|
| 405 | ||||||||||
Other |
| 136 |
|
| 165 | ||||||||||
| Total current liabilities |
| 429 |
|
| 998 | |||||||||
Long-term Debt |
| 3,546 |
|
| 3,147 | ||||||||||
Long-term Debt Payable to Affiliated Companies |
| 150 |
|
| 150 | ||||||||||
Deferred Credits and Other Liabilities |
|
|
|
|
| ||||||||||
Deferred income taxes |
| 953 |
|
| 853 | ||||||||||
Investment tax credits |
| 141 |
|
| 142 | ||||||||||
Accrued pension and other post-retirement benefit costs |
| 183 |
|
| 186 | ||||||||||
Asset retirement obligations |
| 37 |
|
| 37 | ||||||||||
Regulatory liabilities |
| 755 |
|
| 741 | ||||||||||
Other |
| 51 |
|
| 46 | ||||||||||
| Total deferred credits and other liabilities | 2,120 |
|
| 2,005 | ||||||||||
Commitments and Contingencies |
|
|
|
|
| ||||||||||
Common Stockholder's Equity |
|
|
|
|
| ||||||||||
Common Stock, no par; $0.01 stated value, 60,000,000 shares authorized; 53,913,701 shares outstanding at June 30, 2013 and December 31, 2012 |
| 1 |
|
| 1 | ||||||||||
Additional paid-in capital |
| 1,384 |
|
| 1,384 | ||||||||||
Retained earnings |
| 2,490 |
|
| 2,318 | ||||||||||
Accumulated other comprehensive income |
| 4 |
|
| 5 | ||||||||||
| Total common stockholder's equity | 3,879 |
|
| 3,708 | ||||||||||
Total Liabilities and Common Stockholder's Equity | $ | 10,124 |
| $ | 10,008 | ||||||||||
|
|
|
|
|
|
| |||||||||
See Notes to Condensed Consolidated Financial Statements
30
PART I
DUKE ENERGY INDIANA, INC. | ||||||||||||||||||||
Condensed Consolidated Statements Of Cash Flows | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
| Six Months Ended June 30, | |||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| |||||||||||||||
Net income (loss) | $ | 172 |
| $ | (90) | |||||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
| |||||||||||||||
| Depreciation and amortization |
| 158 |
|
| 195 | ||||||||||||||
| Equity component of AFUDC |
| (7) |
|
| (39) | ||||||||||||||
| Impairment charges |
| ― |
|
| 400 | ||||||||||||||
| Deferred income taxes and investment tax credit amortization |
| 92 |
|
| (73) | ||||||||||||||
| Accrued pension and other post-retirement benefit costs |
| 12 |
|
| 8 | ||||||||||||||
| (Increase) decrease in |
|
|
|
|
| ||||||||||||||
|
| Receivables |
| (2) |
|
| 10 | |||||||||||||
|
| Receivables from affiliated companies |
| (6) |
|
| (2) | |||||||||||||
|
| Inventory |
| (17) |
|
| (28) | |||||||||||||
|
| Other current assets |
| (1) |
|
| 19 | |||||||||||||
| Increase (decrease) in |
|
|
|
|
| ||||||||||||||
|
| Accounts payable |
| (7) |
|
| 34 | |||||||||||||
|
| Accounts payable to affiliated companies |
| (13) |
|
| (34) | |||||||||||||
|
| Taxes accrued |
| (8) |
|
| (25) | |||||||||||||
|
| Other current liabilities |
| (10) |
|
| 17 | |||||||||||||
| Other assets |
| 11 |
|
| 26 | ||||||||||||||
| Other liabilities |
| (18) |
|
| (35) | ||||||||||||||
| Net cash provided by operating activities |
| 356 |
|
| 383 | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| |||||||||||||||
Capital expenditures |
| (281) |
|
| (439) | |||||||||||||||
Purchases of available-for-sale securities |
| (5) |
|
| (8) | |||||||||||||||
Proceeds from sales and maturities of available-for-sale securities |
| 5 |
|
| 10 | |||||||||||||||
Notes receivable from affiliated companies |
| (21) |
|
| ― | |||||||||||||||
Other |
| 1 |
|
| (2) | |||||||||||||||
| Net cash used in investing activities |
| (301) |
|
| (439) | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| |||||||||||||||
Proceeds from the issuance of long-term debt |
| ― |
|
| 250 | |||||||||||||||
Payments for the redemption of long-term debt |
| (1) |
|
| (2) | |||||||||||||||
Notes payable to affiliated companies |
| (81) |
|
| (187) | |||||||||||||||
Other |
| (1) |
|
| (2) | |||||||||||||||
| Net cash (used in) provided by financing activities |
| (83) |
|
| 59 | ||||||||||||||
Net (decrease) increase in cash and cash equivalents |
| (28) |
|
| 3 | |||||||||||||||
Cash and cash equivalents at beginning of period |
| 36 |
|
| 16 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 8 |
| $ | 19 | |||||||||||||||
Supplemental Disclosures: |
|
|
|
|
| |||||||||||||||
Significant non-cash transactions: |
|
|
|
|
| |||||||||||||||
| Accrued capital expenditures | $ | 32 |
| $ | 46 | ||||||||||||||
| Transfer of Vermillion Generating Station from Duke Energy Ohio |
| ― |
|
| 26 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
See Notes to Condensed Consolidated Financial Statements
31
PART I
DUKE ENERGY INDIANA, INC. | |||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Statements Of Equity | |||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Accumulated Other Comprehensive Income |
|
| |||||||||||||||||||||||||||||||
(in millions) |
| Common Stock |
| Additional Paid-in Capital |
| Retained Earnings |
| Net Gains (Losses) on Cash Flow Hedges |
| Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2011 |
| $ | 1 |
| $ | 1,358 |
| $ | 2,368 |
| $ | 7 |
| $ | 3,734 | ||||||||||||||||||||||||||
Net loss |
|
| ― |
|
| ― |
|
| (90) |
|
| ― |
|
| (90) | ||||||||||||||||||||||||||
Other comprehensive loss |
|
| ― |
|
| ― |
|
| ― |
|
| (1) |
|
| (1) | ||||||||||||||||||||||||||
Transfer of Vermillion Generating Station from Duke Energy Ohio |
|
| ― |
|
| 26 |
|
| ― |
|
| ― |
|
| 26 | ||||||||||||||||||||||||||
Balance at June 30, 2012 |
| $ | 1 |
| $ | 1,384 |
| $ | 2,278 |
| $ | 6 |
| $ | 3,669 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Balance at December 31, 2012 |
| $ | 1 |
| $ | 1,384 |
| $ | 2,318 |
| $ | 5 |
| $ | 3,708 | ||||||||||||||||||||||||||
Net income |
|
| ― |
|
| ― |
|
| 172 |
|
| ― |
|
| 172 | ||||||||||||||||||||||||||
Other comprehensive loss |
|
| ― |
|
| ― |
|
| ― |
|
| (1) |
|
| (1) | ||||||||||||||||||||||||||
Balance at June 30, 2013 |
| $ | 1 |
| $ | 1,384 |
| $ | 2,490 |
| $ | 4 |
| $ | 3,879 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
32
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements
(Unaudited)
Index to Combined Notes To Condensed Consolidated Financial Statements
The unaudited notes to the condensed consolidated financial statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply.
|
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|
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|
| ||||||||||||||||||
| Applicable Notes | ||||||||||||||||||||||||||||||||||||
Registrant | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | ||||||||||||||||||
Duke Energy Corporation | • | • | • | • | • | • | • | • | • | • | • | • | • | • | • | • |
| • | • | ||||||||||||||||||
Duke Energy Carolinas, LLC | • |
| • | • | • | • |
| • | • | • | • |
|
| • | • | • | • | • | • | ||||||||||||||||||
Progress Energy, Inc. | • | • | • | • | • | • | • | • | • | • | • |
|
| • | • | • | • | • | • | ||||||||||||||||||
Duke Energy Progress, Inc. | • |
| • | • | • | • |
| • | • | • |
|
|
| • | • | • | • | • | • | ||||||||||||||||||
Duke Energy Florida, Inc. | • |
| • | • | • | • |
| • | • | • |
|
|
| • | • | • | • | • | • | ||||||||||||||||||
Duke Energy Ohio, Inc. | • | • | • | • | • | • | • | • |
| • | • |
|
| • | • | • | • | • | • | ||||||||||||||||||
Duke Energy Indiana, Inc. | • | • | • | • | • | • |
| • | • | • | • |
|
| • | • | • | • | • | • | ||||||||||||||||||
|
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| ||||||||||||||||||
1. Organization and Basis of PresentationORGANIZATION AND BASIS OF PRESENTATION
Organization. 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.Carolina, subject to regulation by the Federal Energy Regulatory Commission (FERC). Duke Energy operates in the United States (U.S.) and Latin America primarily through its direct and indirect wholly ownedsubsidiaries. Duke Energy’s subsidiaries include Duke Energy Carolinas, LLC (Duke Energy Carolinas),; Progress Energy, Inc. (Progress Energy); Duke Energy Progress, Inc. (Duke Energy Progress); Duke Energy Florida, Inc. (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio), which includes Duke Energy Kentucky, Inc. (Duke Energy Kentucky), and Duke Energy Indiana, Inc. (Duke Energy Indiana).
On July 2, 2012, Duke Energy merged with Progress Energy, with Duke Energy continuing as the surviving corporation, Progress Energy becoming a subsidiary of Duke Energy and Progress Energy’s regulated utility subsidiaries, Duke Energy Progress (formerly Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc.) and Duke Energy Florida (formerly Florida Power Corporation d/b/a Progress Energy Florida , as well as in Latin America through InternationalInc.), becoming indirect subsidiaries of Duke Energy. Duke Energy’s consolidated financial statements include Progress Energy, Duke Energy Progress and Duke Energy Florida activity beginning July 2, 2012. In accordance with Securities and Exchange Commission (SEC) guidance, Progress Energy, Duke Energy Progress and Duke Energy Florida did not reflect the impacts of acquisition accounting from the merger with Duke Energy, whereby the adjustments of assets and liabilities to fair value and the resultant goodwill would be shown on the financial statements of Progress Energy, Duke Energy Progress and Duke Energy Florida. These adjustments were recorded by Duke Energy. See Note 2 for additional information regarding the merger. When discussing Duke Energy’s condensed consolidated financial information, it necessarily includes the results of its threesix separate subsidiary registrants, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to the Combined Notes. However, none of the registrants makes any representation as to information related solely to Duke Energy or the subsidiaries of Duke Energy other than itself. As discussed further in Note 3, Duke Energy operates in three reportable business segments: U.S. Franchised Electric and Gas (USFE&G), Commercial Power and International Energy. The remainder of Duke Energy’s operations is presented as Other.
These Unaudited Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and all majority-owned subsidiaries where the respective Duke Energy Registrants have control and those variable interest entities (VIEs) where the respective Duke Energy Registrants are the primary beneficiary. These Unaudited Condensed Consolidated Financial Statements also reflect the Duke Energy Carolinas’ approximate 19.25% proportionate share of the Catawba Nuclear Station, as well as Duke Energy Ohio’sRegistrants’ proportionate share of certain generation and transmission facilities in Ohio, Indiana and Kentucky and Duke Energy Indiana’s proportionate share of certain generation and transmission facilities. In January 2012, Duke Energy Ohio completed the sale of its 75% ownership of the Vermillion Generating Station; upon the close, Duke Energy Indiana purchased a 62.5% interest in the station. See Note 2 for further discussion.
Duke Energy Carolinas, a wholly owned subsidiary of Duke Energy, is an electrica regulated public utility company that generates, transmits, distributes and sells 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), the Public Service Commission of South Carolina (PSCSC), the U.S. Nuclear Regulatory Commission (NRC) and the Federal Energy Regulatory Commission (FERC).FERC. Substantially all of Duke Energy Carolinas’ operations are regulated and qualify for regulatory accounting treatment. As discussed further in Note 3, Duke Energy Carolinas’ operations include one reportable business segment, Franchised Electric.
Progress Energy, a wholly owned subsidiary of Duke Energy, Ohio is a holding company headquartered in Raleigh, North Carolina, subject to regulation by the FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. As discussed further in Note 3, Progress Energy’s operations include one reportable segment, Franchised Electric.
Duke Energy Progress, an indirect wholly owned subsidiary of Duke Energy.Energy, 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, the PSCSC, the NRC and the FERC. Substantially all of Duke Energy Progress’ operations are regulated and qualify for regulatory accounting treatment. As discussed further in Note 3, Duke Energy Progress’ operations include one reportable segment, Franchised Electric.
33
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Duke Energy Florida, an indirect wholly owned subsidiary of Duke Energy, 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 jurisdiction of the Florida Public Service Commission (FPSC), the NRC and the FERC. Substantially all of Duke Energy Florida’s operations are regulated and qualify for regulatory accounting treatment. As discussed further in Note 3, Duke Energy Florida’s operations include one reportable segment, Franchised Electric.
Duke Energy Ohio, an indirect wholly owned subsidiary of Duke Energy, is a combination electric and gas public utility that provides service in the southwestern portionportions of Ohio and in northern Kentucky through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky), as well as electric generation in partsportions of Ohio, Illinois and Pennsylvania. Duke Energy Ohio’s principal lines of business include generation, transmission and distribution of electricity, the sale of and/or transportation of natural gas, and energy marketing. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers. Duke Energy Kentucky’s principal lines of business include generation, transmission and distribution of electricity, as well as the sale of and/or transportation of natural gas. References herein to Duke Energy Ohio 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), the Kentucky Public Service Commission (KPSC) and the FERC. Duke Energy Ohio applies regulatory accounting treatment to substantially all of the operations ofin its Franchised Electric and Gas operating segment. Through November 2011, Duke Energy Ohio applied regulatory accounting treatment to certain rate riders associated with retail generation of its Commercial Power operating segment. See Note 3 for further information about Duke Energy Ohio’s business segments.
Duke Energy Indiana, is an indirect wholly owned subsidiary of Duke Energy. Duke Energy, Indiana is an electrica regulated public utility that provides electricity service in north central, central, and southernportions of Indiana. Its primary line of business is generation, transmission and distribution of electricity. Duke Energy Indiana is subject to the regulatory provisions of the Indiana Utility Regulatory Commission (IURC) and the FERC. The substantial majoritySubstantially all of Duke Energy Indiana’s operations are regulated and qualify for regulatory accounting treatment. As discussed further in Note 3, Duke Energy Indiana’s operations include one reportable business segment, Franchised Electric.
See Note 2 for information regarding Duke Energy’s merger with Progress Energy, Inc. (Progress Energy) that closed on July 2, 2012. For the periods presented, Duke Energy’s condensed consolidated financial information does not include the results of Progress Energy and its registrants. Also, the Duke Energy Registrants, as defined above, does not include Progress Energy, Inc., Progress Energy Carolinas or Progress Energy Florida, unless otherwise noted.
Basis of PresentationBASIS OF PRESENTATION.
These Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these Unaudited Condensed Consolidated Financial Statements do not include all of the information and notes required by GAAP in the U.S. for annual financial statements. Because the interim Unaudited Condensed Consolidated Financial Statements and Notes do not include all of the
See Notes to Unaudited Condensed Consolidated Financial Statements
24
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements
information and notes required by GAAP in the U.S. for annual financial statements, the Unaudited Condensed Consolidated Financial Statements and other information included in this quarterly report should be read in conjunction with the respective Consolidated Financial Statements and Notes in the Duke Energy RegistrantsRegistrants’ combined Form 10-K for the year ended December 31, 2011.2012.
These Unaudited Condensed Consolidated Financial Statements, in the opinion of management, reflect all normal recurring adjustments that are, in the opinion of the respective companies’ management, necessary to fairly present the financial position and results of operations of each Duke Energy Registrant. Amounts reported in Duke Energy’s interim Unaudited Condensed Consolidated Statements of Operations and each of the Subsidiary Registrants’ interim Unaudited Condensed Consolidated Statements of Income and Comprehensive Income are not necessarily indicative of amounts expected for the respective annual periods due to the effects of seasonal temperature variations on energy consumption, regulatory rulings, the timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices and other factors.
Duke Energy Ohio and Duke Energy Indiana sell power to and purchase power from PJM Interconnection, LLC (PJM) and Midwest Independent Transmission System Operator, Inc. (MISO), respectively. Duke Energy Ohio and Duke Energy Indiana account for these transactions on a net hourly basis as the transactions are settled on a net hourly basis.
Use of Estimates. ToIn preparing financial statements that conform to GAAP, in the U.S., management makesmust make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported inamounts of revenues and expenses and the Unaudited Condensed Consolidated Financial Statementsdisclosure of contingent assets and Notes. Although these estimates are based on management’s best available informationliabilities at the time, actualdate of the financial statements. Actual results could differ.differ from those estimates.
Prior year financial statements and footnote disclosures for Progress Energy, Duke Energy Progress and Duke Energy Florida have been reclassified to conform to Duke Energy’s presentation.
Unbilled Revenue.UNBILLED REVENUE
Revenues on sales of electricity and gas are recognized when either the service is provided or the product is delivered. Unbilled retail revenues are estimated by applying average revenue per kilowatt-hour (kWh) or per thousand cubic feet (Mcf) for all customer classes to the number of estimated kilowatt-hourskWh or McfsMcf delivered but not billed. Unbilled wholesale energy revenues are calculated by applying the contractual rate per megawatt-hour (MWh) to the number of estimated MWh delivered but not yet billed. Unbilled wholesale demand revenues are calculated by applying the contractual rate per megawatt (MW) to the MW volume delivered but not yet billed. The amount of unbilled revenues can vary significantly from period to period as a result of numerous factors, including seasonality, weather, customer usage patterns and customer mix.
The Duke Energy Duke Energy Carolinas and Duke Energy OhioRegistrants had unbilled revenues within Receivables and within Restricted Receivablesreceivables of Variable Interest Entities and Receivablesvariable interest entities on their respective Condensed Consolidated Balance Sheets as follows:
shown in the table below.
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(in millions) |
| June 30, 2012 |
| December 31, 2011 | (in millions) | June 30, 2013 |
| December 31, 2012 | |||||||
Duke Energy |
| $ | 769 |
| $ | 674 | Duke Energy | $ | 920 |
| $ | 920 | |||
Duke Energy Carolinas |
| $ | 335 |
| $ | 293 | Duke Energy Carolinas |
| 307 |
|
| 315 | |||
Progress Energy | Progress Energy |
| 217 |
|
| 187 | |||||||||
Duke Energy Progress | Duke Energy Progress |
| 122 |
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| 112 | |||||||||
Duke Energy Florida | Duke Energy Florida |
| 95 |
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| 74 | |||||||||
Duke Energy Ohio |
| $ | 51 |
| $ | 50 | Duke Energy Ohio |
| 50 |
|
| 47 | |||
Duke Energy Indiana |
| $ | 8 |
| $ | 2 | Duke Energy Indiana |
| 13 |
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| 3 | |||
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Additionally, Duke Energy Ohio and Duke Energy Indiana sell, on a revolving basis, nearly all of their retail and wholesale accounts receivable to Cinergy Receivables Company, LLC (CRC). These transfers meet sales/derecognition criteria and, therefore, Duke Energy Ohio and Duke
34
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Energy Indiana account for the transfers of receivables to Cinergy ReceivablesCRC as sales, and accordinglysales. Accordingly, the receivables sold are not reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 11 for further information. Receivables for unbilled revenues related to retail and wholesale accounts receivable at Duke Energy Ohio and Duke Energy Indiana included in the sales of accounts receivable to CRC were as follows:shown in the table below.
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(in millions) | June 30, 2013 |
| December 31, 2012 | ||||||
Duke Energy Ohio | $ | 71 |
| $ | 90 | ||||
Duke Energy Indiana |
| 117 |
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| 132 | ||||
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NET INCOME AMOUNTS ATTRIBUTABLE TO CONTROLLING INTERESTS
The following presents the net income amounts attributable to controlling interests for the Duke Energy Registrants with noncontrolling interests.
(in millions) |
| June 30, 2012 |
| December 31, 2011 | |||
Duke Energy Ohio |
| $ | 80 |
| $ | 89 | |
Duke Energy Indiana |
| $ | 140 |
| $ | 115 | |
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| See Note 11 for additional information. | ||||||
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(in millions) | Duke Energy |
| Progress Energy | ||||||
Three Months Ended June 30, 2013 |
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Income from continuing operations, net of tax | $ | 342 |
| $ | (13) | ||||
Discontinued operations, net of tax |
| (3) |
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| (4) | ||||
Net income attributable to controlling interests | $ | 339 |
| $ | (17) | ||||
Three Months Ended June 30, 2012 |
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Income from continuing operations, net of tax | $ | 445 |
| $ | 67 | ||||
Discontinued operations, net of tax |
| (1) |
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| (4) | ||||
Net income attributable to controlling interests | $ | 444 |
| $ | 63 | ||||
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(in millions) | Duke Energy |
| Progress Energy | ||||||
Six Months Ended June 30, 2013 |
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Income from continuing operations, net of tax | $ | 976 |
| $ | 140 | ||||
Discontinued operations, net of tax |
| (3) |
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| (4) | ||||
Net income attributable to controlling interests | $ | 973 |
| $ | 136 | ||||
Six Months Ended June 30, 2012 |
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Income from continuing operations, net of tax | $ | 738 |
| $ | 206 | ||||
Discontinued operations, net of tax |
| 1 |
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| 7 | ||||
Net income attributable to controlling interests | $ | 739 |
| $ | 213 | ||||
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ACCUMULATED OTHER COMPREHENSIVE INCOME
For the three and six months ended June 30, 2013 and 2012, reclassifications out of accumulated other comprehensive income (AOCI) for the Duke Energy Registrants were not material. Changes in AOCI for the Duke Energy Registrants are presented in their respective Condensed Consolidated Statements of Equity.
2. Acquisitions and Sales of Other AssetsACQUISITIONS, DISPOSITIONS AND SALES OF OTHER ASSETS
Acquisitions.ACQUISITIONS
The Duke Energy Registrants consolidate assets and liabilities from acquisitions as of the purchase date, and include earnings from acquisitions in consolidated earnings afterbeginning on the purchase date.
Merger with Progress Energy
Description of Transaction
On July 2, 2012, Duke Energy completed theits merger contemplated by the Agreement and Plan of Merger (Merger Agreement), among Diamond Acquisition Corporation, a North Carolina corporation and Duke Energy’s wholly owned subsidiary (Merger Sub) andwith Progress Energy, a North Carolina corporation engaged in the regulated utility business of generation, transmission and distribution and sale of electricity in portions of North Carolina, South Carolina and Florida. As a result of the merger, Merger Sub was merged into Progress Energy and Progress Energy became a wholly owned subsidiary of Duke Energy.
The merger between Duke Energy and Progress Energy provides increased scale and diversity with potentially enhanced access to capital over the long-term and a greater ability to undertake the significant construction programs necessary to respond to increasing environmental regulation, plant retirements and customer demand growth. Duke Energy’s business risk profile is expected to improve over-time due to the increased proportion of the business that is regulated. Additionally, cost savings, efficiencies and other benefits are expected from the combined operations.
Immediately preceding the merger, Duke Energy completed a one-for-three reverse stock split with respect to the issued and outstanding shares of Duke Energy common stock. The shareholders of Duke Energy approved the reverse stock split at Duke Energy’s special meeting of shareholders
25
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
held on August 23, 2011. All share and per share amounts presented throughout these financial statements reflect the impact of the one-for-three reverse stock split.
Progress Energy’s shareholders received 0.87083 shares of Duke Energy common stock in exchange for each share of Progress Energy common stock outstanding as of July 2, 2012. Generally, all outstanding Progress Energy equity-based compensation awards were converted into Duke Energy equity-based compensation awards using the same ratio. The merger was structured as a tax-free exchange of shares.
Merger Related Regulatory Matters
Federal Energy Regulatory Commission. On June 8, 2012, the FERC conditionally approved the merger including Duke Energy and Progress Energy’s revised market power mitigation plan, the Joint Dispatch Agreement (JDA) and the joint Open Access Transmission Tariff (OATT). The revised market power mitigation plan provides for the construction of seven transmission projects (Long-term FERC Mitigation) and interim firm power sale agreements during the construction of the transmission projects (Interim FERC Mitigation). The Long-term FERC Mitigation is estimated to cost approximately $110 million. The Long-term FERC Mitigation plan will increase power imported into the Duke Energy Carolinas and Progress Energy Carolinas service areas and enhance competitive power supply options in the service areas. The construction of these projects will occur over the next two to three years. In conjunction with the Interim FERC Mitigation plan, Duke Energy Carolinas and Progress Energy Carolinas entered into power sale agreements that were effective with the consummation of the merger. These agreements, or similar power sale agreements, will be in place until the Long-term FERC Mitigation is operational. The agreements are for around-the-clock delivery of power during the winter and summer in quantities that vary by season and by peak period. The following table summarizes the amount of megawatts per hour contracted to be sold under the Interim FERC Mitigation agreements.
Megawatts per hour |
| Duke Energy Carolinas |
| Progress Energy Carolinas |
| Duke Energy | |
Summer off-peak |
| 300 |
| 500 |
| 800 | |
Summer on-peak |
| 150 |
| 325 |
| 475 | |
Winter off-peak |
| 225 |
| ― |
| 225 | |
Winter on-peak |
| 25 |
| ― |
| 25 | |
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The FERC order requires an independent party to monitor whether the power sale agreements remain in effect during construction of the transmission projects and provide quarterly reports to the FERC regarding the status of construction of the transmission projects.
·On June 25, 2012, Duke Energy and Progress Energy accepted the conditions imposed by the FERC.
·On July 10, 2012, certain intervenors requested a rehearing seeking to overturn the June 8, 2012 order by the FERC.
North Carolina Utilities Commission and Public Service Commission of South Carolina. In September 2011, Duke Energy and Progress Energy reached settlements with the Public Staff of the North Carolina Utilities Commission (NC Public Staff) and the South Carolina Office of Regulatory Staff (ORS) and certain other interested parties in connection with the regulatory proceedings related to the merger, the JDA and the OATT that were pending before the NCUC and PSCSC. These settlements were updated in May 2012 to reflect the results of ongoing merger related applications pending before the FERC. As part of these settlements and the application for approval of the merger by the NCUC and PSCSC, Duke Energy Carolinas and Progress Energy Carolinas agreed to the conditions and obligations listed below.
·Guarantee of $650 million in system fuel and fuel-related savings over 60 to 78 months for North Carolina and South Carolina retail customers. The savings are expected to be achieved through coal blending, coal commodity and transportation savings, gas transportation savings, and the joint dispatch of Duke Energy Carolinas and Progress Energy Carolinas generation fleets.
·Duke Energy Carolinas and Progress Energy Carolinas will not seek recovery from retail customers for the cost of the Long-term FERC Mitigation for five years following merger consummation. After five years, Duke Energy Carolinas and Progress Energy Carolinas may seek to recover the costs of the Long-term FERC Mitigation, but must show that the projects are needed to provide adequate and reliable retail service regardless of the merger.
·A $65 million rate reduction over the term of the Interim FERC Mitigation to reflect the cost of capacity not available to Duke Energy Carolinas and Progress Energy Carolinas retail customers during the Interim FERC Mitigation. The rate reduction will be achieved through a rider and will be apportioned between Duke Energy Carolinas and Progress Energy Carolinas retail customers.
·Duke Energy Carolinas and Progress Energy Carolinas will not seek recovery from retail customers for any revenue shortfalls or fuel-related costs associated with the Interim FERC Mitigation. The Interim FERC Mitigation agreements were in a loss position for Duke Energy as of the date of the merger consummation.
·Duke Energy Carolinas and Progress Energy Carolinas will not seek recovery from retail customers for any of their allocable share of merger related severance costs.
·Duke Energy Carolinas and Progress Energy Carolinas will provide community support through charitable contributions for four years, workforce development, low income energy assistance, and green energy assistance at a total cost of approximately $100 million, which cannot be recovered from retail customers.
·Duke Energy Carolinas and Progress Energy Carolinas will abide by revised North Carolina Regulatory Conditions and Code of Conduct governing their operations.
On June 29, 2012, the NCUC approved the merger application and the JDA application with conditions that were reflective of the settlement agreements described above. On July 2, 2012, the PSCSC approved the JDA application subject to Duke Energy Carolinas and Progress Energy Carolinas providing their South Carolina retail customers pro rata benefits equivalent to those approved by the NCUC in its merger approval order.
26
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
On July 6, 2012, the NCUC issued an order initiating investigation and scheduling hearings on the Duke Energy board of directors’ decision on July 2, 2012, to replace William D. Johnson with James E. Rogers as President and CEO of Duke Energy subsequent to the merger close, as well as other related matters. See Note 4 for further information.
Kentucky Public Service Commission. On June 24, 2011, Duke Energy and Progress Energy filed a settlement agreement with the Kentucky Attorney General. On August 2, 2011, the KPSC issued an order conditionally approving the merger and required Duke Energy and Progress Energy to accept all conditions contained in the order. Duke Energy and Progress Energy requested and were granted rehearing on the limited issue of the wording of one condition relating to the composition of Duke Energy’s post-merger board of directors. On October 28, 2011, the KPSC issued its order approving a settlement with the Kentucky Attorney General on the revised condition relating to the composition of the post-merger Duke Energy board. Duke Energy and Progress Energy filed their acceptance of the condition on November 2, 2011. Duke Energy Kentucky agreed to (i) not file new gas or electric base rate applications for two years from the date of the KPSC’s final order in the merger proceedings, (ii) make five annual shareholder contributions of $165,000 each to support low-income weatherization efforts and economic development within Duke Energy Kentucky’s service territory and (iii) not seek recovery from retail customers for any of their allocable share of merger related costs.
Accounting Charges to be Recognized Related to the Merger Consummation
Duke Energy anticipates recording charges of approximately $450 million to $550 million in the second half of 2012 associated with the merger. This estimate includes the costs of Long-term FERC Mitigation, Interim FERC Mitigation, the retail rate reduction associated with Interim FERC Mitigation, employee severance, obligations to provide community support and merger transaction expenses. The allocation of these charges to individual subsidiaries will be determined in the third quarter. The majority of these charges will be recognized by Duke Energy Carolinas and Progress Energy Carolinas. See Note 15 for further information related to employee severance expenses.
Duke Energy also expects to incur significant system integration and other merger-related transition costs primarily through 2014 that are necessary in order to achieve certain cost savings, efficiencies and other benefits anticipated to result from the merger with Progress Energy.
Purchase Price
Pursuant to the merger, all Progress Energy common shares were exchanged at the fixed exchange ratio of 0.87083 common shares of Duke Energy for each Progress Energy common share. The total consideration transferred in the mergerof $18,071 million, including $62 million fair value of stock-based compensation awards, was based on the closing price of Duke Energy common shares on July 2, 2012,2012. The significant assets and was calculatedliabilities recorded at fair values as follows:
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Progress Energy’s stock-based compensation awards, including performance shares and restricted stock, were replaced with Duke Energy awards upon consummation of the merger. In accordance with accounting guidance for business combinations, a portion ofacquisition date include the fair value of these awards is included in the purchase price as it represents consideration transferred in the merger.
Purchase Price Allocationacquired long-term debt, asset retirement obligations, capital leases and pension and other post-retirement benefit (OPEB) plans.
The fair value of Progress Energy’s assets acquired and liabilities assumed was determined based on significant estimates and assumptions, thatincluding Level 3 inputs, which are judgmental in nature, includingnature. The estimates and assumptions include the projected timing and amount of future cash flows, (including timing); discount rates reflecting risk inherent in the future cash flows and future market pricesprices.
35
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Additionally the February 5, 2013 announcement of long-term debt. The fair valuethe decision to retire Crystal River Nuclear Station - Unit 3 (Crystal River Unit 3), reflects additional information related to the facts and circumstances that existed as of the acquisition date. See Note 4 for additional information related to Crystal River Unit 3. As such, Duke Energy presents the Progress Energy’s assetEnergy assets acquired and liabilities assumed utilized for purchase price allocation are considered preliminary as a resultif the retirement of Crystal River Unit 3 occurred on the short time period between the consummation of the merger and the filing of this Form 10-Q.acquisition date.
The majority of Progress Energy’s operations are subject to the rate-setting authority of the FERC, the NCUC, the PSCSC, and the Florida Public Service Commission (FPSC)FPSC and are accounted for pursuant to U.S. generally accepted accounting principles,GAAP, including the accounting guidance for regulated operations. The rate-setting and cost recovery provisions currently in place for Progress Energy’s regulated operations provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. Thus,Except for long-term debt, asset retirement obligations, capital leases, pension and OPEB plans and the wholesale portion of Duke Energy Florida’s Crystal River Unit 3, the fair values of Progress Energy’s tangible and intangible assets and liabilities subject to these rate-setting provisions approximate their carrying values, and the assets and liabilities acquired and pro forma financial information do not reflect any net adjustments related to these amounts.
The significant assets and liabilities for which preliminary valuation amounts are reflected as of the filing of this Form 10-Q include thedifference between fair value ofand the acquired pension and other post-retirement benefit (OPEB) plans,pre-merger carrying amounts for Progress Energy’s long-term debt, asset retirement obligations, capital leases and long-term debt. The preliminary fair value ofpension and OPEB plans for the outstanding stock compensation awards is included in the purchase priceregulated operations were recorded as consideration transferred. The preliminary amounts recognized are subject to revision until the valuations are completed and to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date.Regulatory assets.
The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed will bewas recognized as goodwill inat the third quarter of 2012.acquisition date. The goodwill reflects the value paid primarily for the long-term potential for enhanced access to capital as a result of the company’s increased scale and diversity, opportunities for synergies, and an improved risk profile. The allocation of goodwill toresulting from Duke Energy’s reporting units has not yet been completed as a result ofmerger with Progress Energy was allocated entirely to the short time period between the closing of the merger and the filing of this Form 10-Q.USFE&G segment. None of the goodwill recognized is deductible for income tax purposes, and as such, no deferred taxes will behave been recorded related to goodwill.
The preliminarycompleted purchase price allocation of the merger was as follows:
27
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
is presented in the following table.
(in millions) |
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Current assets |
| $ | | ||
Property, plant and equipment |
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Goodwill |
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Other long-term assets, excluding goodwill |
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Total assets |
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Current liabilities, including current maturities of long-term debt |
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Total |
| $ | 18,071 | ||
The purchase price allocation in the table above reflects refinements made to the preliminary fair values of the assets acquired and liabilities assumed that were included in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2012, including adjustments associated with the retirement of Crystal River Unit 3. The changes resulted in an increase to Goodwill of $2 million, an increase to the fair value of Current Quarter Impactliabilities, including Current maturities of Merger
Duke Energy incurred pre-tax transactionlong-term debt of $12 million, a decrease to Property, plant and integration related costsequipment of $7$138 million, a decrease to Other long-term assets, excluding goodwill of $4 million and $15 million,a decrease to Long-term liabilities, preferred stock and noncontrolling interests of $152 million. These refinements had no impact on the amortization of the purchase accounting adjustments recorded to earnings during 2012 or for the three and six months ended June 30, 2012, respectively, and $5 million and $16 million, for the three and six months ended June 30, 2011, respectively, substantially all of which were recorded within Operation, maintenance and other in Duke Energy’s Condensed Consolidated Statements of Operations.2013.
Pro Forma Financial Information
The following unaudited pro forma financial information reflects the consolidated results of operations of Duke Energy for the three and six months ended June 30, 2012 and reflects the amortization of purchase price adjustments assuming the merger had taken place on January 1, 2011. The unaudited pro forma financial 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. This information is preliminary in nature
Non-recurring merger consummation, integration and subject to change based on final purchase price adjustments.
The pro forma financial information does not include potential cost savings or non-recurring adjustments that will be recorded in the third quarter in connection with the merger or non-recurring costs directly related to the merger. Non-recurring transaction and integrationother costs incurred by both Duke Energy and Progress Energy during the three and six months ended June 30, 2012 have also been excluded from the pro forma earnings presented below. After-tax non-recurring transactionmerger consummation, integration and integrationother costs incurred by both Duke Energy and Progress Energy were $12$19 million and $18$29 million respectively, for the three and six months ended June 30, 2012. The pro forma financial information also excludes potential future cost savings or non-recurring charges related to the merger.
|
|
|
|
|
|
|
| |||
(in millions, except per share amounts) |
| Three Months Ended June 30, 2012 |
| Six Months Ended June 30, 2012 | ||||||
Revenues |
| $ | 5,858 |
| $ | 11,582 | ||||
Net Income Attributable to Duke Energy Corporation |
|
| 535 |
|
| 998 | ||||
Basic and Diluted Earnings Per Share |
|
| 0.76 |
|
| 1.42 | ||||
|
|
|
|
|
|
|
| |||
Chilean Operations
In December 2012, International Energy acquired Iberoamericana de Energía Ibener, S.A. (Ibener) of Santiago, Chile for cash consideration of $415 million. This acquisition included the 140 MW Duqueco hydroelectric generation complex consisting of two run-of-the-river plants located in southern Chile. The preliminary purchase accounting entries consisted primarily of $383 million of property, plant and $4equipment, $30 million of intangible assets, $57 million of deferred income tax liabilities, $54 million of goodwill, and $20$6 million respectively,of working capital. The fair value of the assets acquired and liabilities assumed utilized for the threepurchase price allocation are preliminary and six months ended June 30, 2011.subject to revision until the
36
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||
(in millions, except per share amounts) |
| 2012 |
| 2011 |
| 2012 |
| 2011 | |||||
Revenues |
| $ | 5,843 |
| $ | 5,789 |
| $ | 11,557 |
| $ | 11,613 | |
Net Income Attributable to Duke Energy Corporation |
|
| 527 |
|
| 621 |
|
| 984 |
|
| 1,338 | |
Basic and Diluted Earnings Per Share |
| $ | 0.75 |
| $ | 0.89 |
| $ | 1.40 |
| $ | 1.91 |
PART I
ReferDUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Note 5 forCondensed Consolidated Financial Statements – (Continued)
(Unaudited)
valuations are completed and to the extent that additional information regarding Progress Energy merger shareholder litigation.is obtained about the facts and circumstances that existed as of the acquisition date. In April 2013, a $190 million six-month bridge loan executed in connection with the acquisition was replaced with a $230 million nonrecourse secured credit facility with a term of thirteen years, and $192 million of cash collateral related to the six-month bridge loan was returned to Duke Energy.
Vermillion Generating Station.Station
On January 12, 2012, after receiving approvals from the FERC and the IURC on August 12, 2011 and December 28, 2011, respectively, Duke Energy Vermillion II, LLC (Duke Energy Vermillion), an indirect wholly owned subsidiary of Duke Energy Ohio, completed the sale of its 75%75 percent undivided ownership interest in the Vermillion Generating Station (Vermillion) to Duke Energy Indiana and Wabash Valley Power Association (WVPA). Upon the closing of the sale, Duke Energy Indiana and WVPA held 62.5%62.5 percent and 37.5%37.5 percent interests in Vermillion, respectively. Duke Energy Ohio received net proceeds of $82 million, consisting of $68 million and $14 million from Duke Energy Indiana and WVPA, respectively. Following the transaction, Duke Energy Indiana retired Gallagher Units 1 and 3 effective February 1, 2012.
As Duke Energy Indiana is an affiliate of Duke Energy Vermillion the transaction has been accounted for as a transfer between entities under common control with no gain or loss recorded and did not have a significant impact to Duke Energy Ohio or Duke Energy Indiana’s results of operations. The proceeds received from Duke Energy Indiana are included in Net proceeds from the sales of other assets on Duke Energy Ohio’s Condensed Consolidated Statements of Cash Flows. The cash paid to Duke Energy Ohio is included in Capital expenditures on Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows. Duke Energy Ohio and Duke Energy Indiana recognized non-cash after-tax equity transfers of $28 million and $26 million, respectively, in their Condensed Consolidated Statements of Common Stockholder’s Equity on the transaction representing the difference between cash exchanged and the net book value of Vermillion. These amounts are not reflected in Duke Energy’s Condensed Consolidated Statements of Cash Flows or Condensed Consolidated Statements of Equity as the transaction is eliminated in consolidation.
The proceeds from WVPA are included in Net proceeds from the sales of other assets, and sale of and collections on notes receivable on Duke Energy and Duke Energy Ohio’s Condensed Consolidated Statements of Cash Flows. In the second quarter of 2011, Duke Energy Ohio recorded a pre-tax impairment charge of $9 million to adjust the carrying value of the proportionate share of Vermillion to be sold to WVPA to the proceeds to be received from WVPA less costs to sell. The sale of the proportionate share of Vermillion to WVPA did not result in a significant additional gain or loss upon close of the transaction.
28
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
Wind Projects Joint Venture.
In April 2012, Duke Energy executed a joint venture agreement with Sumitomo Corporation of America (SCOA). Under the terms of the agreement, Duke Energy and SCOA will each own a 50% interest in the joint venture (DS Cornerstone, LLC), which owns two wind generation projects. One of the facilities began commercial operations in June 2012 and the other facility is under construction. Duke Energy and SCOA also negotiated a $330 million, Construction and 12-year amortizing Term Loan Facility, on behalf of the borrower, a wholly owned subsidiary of the joint venture. The loan agreement is non-recourse to Duke Energy. Duke Energy received proceeds of $319 million upon execution of the loan agreement. This amount represents reimbursement of a significant portion of Duke Energy’s construction costs incurred as of the date of the agreement. Beginning in April 2012, and through completion of the projects, Duke Energy and SCOA will each fund 50% of the remaining construction cost of the projects through contributions to the joint venture. Duke Energy will consolidate the joint venture until the project under construction reaches commercial operations later in 2012. This transaction is expected to result in an insignificant gain to Duke Energy at the time construction is complete, where upon Duke Energy will no longer consolidate the joint venture. See Note 11 for further information.loss.
3. Business SegmentsBUSINESS SEGMENTS
Effective with the first quarter of 2012, management began evaluatingManagement evaluates segment performance based on Segment Income. Segment Income, which 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 in the Condensed Consolidated Financial Statements. In conjunction with management’s use of the new reporting measure, certainCertain governance costs that were previously unallocated have now beenare allocated to each of the segments. In addition, direct interest expense and income taxes are included in segment income. Prior year segment profitability information has been recast to conform to the current year presentation. NoneSegment Income.
Operating segments for each of these changes impacts the reportable operating segments or the Duke Energy Registrants’ previously reported consolidated revenues, net income or earnings-per-share.Registrants are determined based on information used by the chief operating decision maker in deciding how to allocate resources and evaluate the performance at each of the Duke Energy Registrants.
Products and services are sold between affiliate companies and between reportable segments at cost. Segment assets as presented in the tables that follow exclude all intercompany assets.
Duke EnergyDUKE ENERGY
Duke Energy has the following reportable operating segments: U.S. Franchised Electric and Gas (USFE&G),USFE&G, Commercial Power and International Energy.
USFE&G generates, transmits, distributes and sells electricity in central and westernportions of North Carolina, western South Carolina, central, north central and southernFlorida, Indiana, and northern Kentucky. USFE&G also transmits and distributes electricity in southwesternportions of Ohio. Additionally, USFE&G transports and sells natural gas in southwesternportions of Ohio and northern Kentucky. It conducts operations primarily through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, certain regulated portions of Duke Energy Ohio, including Duke Energy Kentucky, and Duke Energy Indiana. Segment information for USFE&G includes the results of the regulated operations of Duke Energy Progress and Duke Energy Florida beginning July 2, 2012.
Commercial Power owns, operates and manages power plants owned by Duke Energy Ohio and engages in the wholesale marketing and procurement of electric power,electricity, fuel and emission allowances related to these plants, as well as other contractual positions. Commercial Power also has a retail sales subsidiary, Duke Energy Retail Sales, LLC (Duke Energy Retail), which is certified by the PUCO as a Competitive Retail Electric Service provider in Ohio.provider. Through Duke Energy Generation Services, Inc. and its affiliates (DEGS), Commercial Power engages in the development, construction and operation of renewable energy projects. In addition, DEGS developsand commercial transmission projects. DEGS also owns and operates electric generation for large energy consumers, municipalities, utilities and industrial facilities.projects in the U.S.
International Energy principally operates and manages power generation facilities and engages in sales and marketing of electric powerelectricity and natural gas outside the U.S. It conducts operations primarily through Duke Energy International, LLC and its affiliates and its activities principally target power generation in Latin America. Additionally, International Energy owns a 25%25 percent interest in National Methanol Company, located in Saudi Arabia, which is a large regional producer of methanol and methyl tertiary butyl ether.ether (MTBE).
The remainder of Duke Energy’s operations is presented as Other. While it is not considered an operating segment, Other primarily includes unallocated corporate costs, which include costs not allocable to Duke Energy’s reportable business segments, primarily governance,consists of interest expense on corporate debt instruments, costs to achieve mergers and divestitures, and costs associated with certain corporate severance programs. It also includes Bison Insurance Company Limited (Bison), Duke Energy’sa wholly owned, captive insurance subsidiary, Duke Energy’s 50%50 percent interest in DukeNet Communications, LLC (DukeNet) and related telecommunications businesses, and Duke Energy’s 60 percent interest in Duke Energy Trading and Marketing, LLC, which is 40% owned by Exxon Mobil Corporation and 60% owned by Duke Energy.
LLC.
Business Segment Data |
|
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| |
|
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|
|
|
|
|
|
| Segment Income/ | |
|
| Unaffiliated |
| Intersegment |
| Total |
| Consolidated | ||||
(in millions) | Revenues |
| Revenues |
| Revenues |
| Net Income(a) | |||||
Three Months Ended June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
| |
USFE&G | $ | 2,688 |
| $ | 9 |
| $ | 2,697 |
| $ | 337 | |
Commercial Power |
| 488 |
|
| 14 |
|
| 502 |
|
| 28 | |
International Energy |
| 397 |
|
| ― |
|
| 397 |
|
| 105 | |
| Total reportable segments |
| 3,573 |
|
| 23 |
|
| 3,596 |
|
| 470 |
Other |
| 4 |
|
| 12 |
|
| 16 |
|
| (25) | |
Eliminations |
| ― |
|
| (35) |
|
| (35) |
|
| ― | |
Add back of noncontrolling interest component |
| ― |
|
| ― |
|
| ― |
|
| 4 | |
Income from Discontinued Operations, net of tax |
| ― |
|
| ― |
|
| ― |
|
| (1) | |
| Total consolidated | $ | 3,577 |
| $ | ― |
| $ | 3,577 |
| $ | 448 |
Three Months Ended June 30, 2011 |
|
|
|
|
|
|
|
|
|
|
| |
USFE&G | $ | 2,540 |
| $ | 9 |
| $ | 2,549 |
| $ | 297 | |
Commercial Power |
| 592 |
|
| 3 |
|
| 595 |
|
| 30 | |
International Energy |
| 406 |
|
| ― |
|
| 406 |
|
| 127 | |
| Total reportable segments |
| 3,538 |
|
| 12 |
|
| 3,550 |
|
| 454 |
Other |
| (4) |
|
| 13 |
|
| 9 |
|
| (19) | |
Eliminations |
| ― |
|
| (25) |
|
| (25) |
|
| ― | |
Add back of noncontrolling interest component |
| ― |
|
| ― |
|
| ― |
|
| 6 | |
| Total consolidated | $ | 3,534 |
| $ | ― |
| $ | 3,534 |
| $ | 441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| Three Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||
(in millions) | USFE&G |
| Commercial Power |
| International Energy |
| Total Reportable Segments |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||||||||||||
Unaffiliated revenues(a)(b) | $ | 4,911 |
| $ | 547 |
| $ | 406 |
| $ | 5,864 |
| $ | 15 |
| $ | ― |
| $ | 5,879 | |||||||||||||||||||||||||||
Intersegment revenues |
| 9 |
|
| 10 |
|
| ― |
|
| 19 |
|
| 21 |
|
| (40) |
|
| ― | |||||||||||||||||||||||||||
| Total revenues | $ | 4,920 |
| $ | 557 |
| $ | 406 |
| $ | 5,883 |
| $ | 36 |
| $ | (40) |
| $ | 5,879 | ||||||||||||||||||||||||||
Segment income(a)(b)(c)(d)(e) | $ | 353 |
| $ | 41 |
| $ | 87 |
| $ | 481 |
| $ | (139) |
| $ | ― |
| $ | 342 | |||||||||||||||||||||||||||
Add back noncontrolling interests component |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
| 3 | |||||||||||||||||||||||||||
Loss from discontinued operations, net of tax |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) | |||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 342 | |||||||||||||||||||||||||||
Segment assets as of June 30, 2013 | $ | 98,908 |
| $ | 6,907 |
| $ | 5,480 |
| $ | 111,295 |
| $ | 2,663 |
| $ | 142 |
| $ | 114,100 | |||||||||||||||||||||||||||
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2937
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
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|
|
| Segment Income/ | |
|
| Unaffiliated |
| Intersegment |
| Total |
| Consolidated | ||||
(in millions) | Revenues |
| Revenues |
| Revenues |
| Net Income(a) | |||||
Six Months Ended June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
| |
USFE&G(b) | $ | 5,348 |
| $ | 17 |
| $ | 5,365 |
| $ | 473 | |
Commercial Power |
| 1,052 |
|
| 30 |
|
| 1,082 |
|
| 59 | |
International Energy |
| 799 |
|
| ― |
|
| 799 |
|
| 247 | |
| Total reportable segments |
| 7,199 |
|
| 47 |
|
| 7,246 |
|
| 779 |
Other |
| 8 |
|
| 23 |
|
| 31 |
|
| (41) | |
Eliminations |
| ― |
|
| (70) |
|
| (70) |
|
| ― | |
Add back of noncontrolling interest component |
| ― |
|
| ― |
|
| ― |
|
| 8 | |
Income from Discontinued Operations, net of tax |
| ― |
|
| ― |
|
| ― |
|
| 1 | |
| Total consolidated | $ | 7,207 |
| $ | ― |
| $ | 7,207 |
| $ | 747 |
Six Months Ended June 30, 2011 |
|
|
|
|
|
|
|
|
|
|
| |
USFE&G | $ | 5,214 |
| $ | 18 |
| $ | 5,232 |
| $ | 638 | |
Commercial Power |
| 1,234 |
|
| 5 |
|
| 1,239 |
|
| 79 | |
International Energy |
| 754 |
|
| ― |
|
| 754 |
|
| 255 | |
| Total reportable segments |
| 7,202 |
|
| 23 |
|
| 7,225 |
|
| 972 |
Other |
| (5) |
|
| 25 |
|
| 20 |
|
| (26) | |
Eliminations |
| ― |
|
| (48) |
|
| (48) |
|
| ― | |
Add back of noncontrolling interest component |
| ― |
|
| ― |
|
| ― |
|
| 8 | |
| Total consolidated | $ | 7,197 |
| $ | ― |
| $ | 7,197 |
| $ | 954 |
|
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(a) | Segment results exclude noncontrolling interests and results of entities classified as discontinued operations. | |||||||||||
(b) | As discussed further in Note 4, Duke Energy recorded pre-tax impairment and other charges of $420 million in the first quarter of 2012 related to the Edwardsport IGCC project. |
Segment Assets |
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| ||
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| Segment assets in the following table exclude all intercompany assets. | ||||||
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|
(in millions) | June 30, 2012 |
| December 31, 2011 | ||||
USFE&G | $ | 48,451 |
| $ | 47,977 | ||
Commercial Power |
| 7,268 |
|
| 6,939 | ||
International Energy |
| 4,678 |
|
| 4,539 | ||
| Total reportable segments |
| 60,397 |
|
| 59,455 | |
Other |
| 2,593 |
|
| 2,961 | ||
Reclassifications(a) |
| 41 |
|
| 110 | ||
| Total consolidated assets | $ | 63,031 |
| $ | 62,526 | |
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|
|
(a) | Primarily represents reclassification of federal tax balances in consolidation. |
(a) | On May 1, 2013, the PUCO approved a Duke Energy Ohio settlement agreement that provides for a net annual increase in electric distribution revenues of $49 million, beginning in May 2013. This rate increase impacts USFE&G. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | On May 30, 2013, the NCUC approved a Duke Energy Progress settlement agreement that included a $147 million increase in rates in the first year, beginning on June 1, 2013. This rate increase impacts USFE&G. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | USFE&G recorded an after-tax impairment charge of $180 million, net of tax of $115 million, related to Duke Energy Florida's Crystal River Unit 3. See Note 4 for additional information. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(d) | USFE&G recorded an after-tax impairment charge of $13 million, net of tax of $9 million, related to the letter Duke Energy Progress filed with the NRC requesting the NRC to suspend its review activities associated with the combined construction and operating license (COL) at the Shearon Harris Nuclear Station (Harris) site. USFE&G also recorded an after-tax impairment charge of $44 million, net of tax of $21 million, related to the write-off of the wholesale portion of Levy investments at Duke Energy Florida in accordance with the 2013 Settlement. See Note 4 for additional information. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(e) | Other includes after-tax costs to achieve the merger with Progress Energy of $51 million, net of tax of $31 million. See Note 2 for additional information about the merger. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | USFE&G |
| Commercial Power |
| International Energy |
| Total Reportable Segments |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||||||||||||
Unaffiliated revenues | $ | 2,688 |
| $ | 488 |
| $ | 397 |
| $ | 3,573 |
| $ | 4 |
| $ | ― |
| $ | 3,577 | |||||||||||||||||||||||||||
Intersegment revenues |
| 9 |
|
| 14 |
|
| ― |
|
| 23 |
|
| 12 |
|
| (35) |
|
| ― | |||||||||||||||||||||||||||
| Total revenues | $ | 2,697 |
| $ | 502 |
| $ | 397 |
| $ | 3,596 |
| $ | 16 |
| $ | (35) |
| $ | 3,577 | ||||||||||||||||||||||||||
Segment income | $ | 337 |
| $ | 28 |
| $ | 105 |
| $ | 470 |
| $ | (25) |
| $ | ― |
| $ | 445 | |||||||||||||||||||||||||||
Add back noncontrolling interests component |
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| 4 | |||||||||||||||||||||||||||
Loss from discontinued operations, net of tax |
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| (1) | |||||||||||||||||||||||||||
Net income |
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| $ | 448 | |||||||||||||||||||||||||||
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| Six Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||
(in millions) | USFE&G |
| Commercial Power |
| International Energy |
| Total Reportable Segments |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||||||||||||
Unaffiliated revenues(a)(b) | $ | 9,963 |
| $ | 986 |
| $ | 798 |
| $ | 11,747 |
| $ | 30 |
| $ | ― |
| $ | 11,777 | |||||||||||||||||||||||||||
Intersegment revenues |
| 17 |
|
| 23 |
|
| ― |
|
| 40 |
|
| 41 |
|
| (81) |
|
| ― | |||||||||||||||||||||||||||
| Total revenues | $ | 9,980 |
| $ | 1,009 |
| $ | 798 |
| $ | 11,787 |
| $ | 71 |
| $ | (81) |
| $ | 11,777 | ||||||||||||||||||||||||||
Segment income(a)(b)(c)(d)(e) | $ | 1,009 |
| $ | (1) |
| $ | 184 |
| $ | 1,192 |
| $ | (216) |
| $ | ― |
| $ | 976 | |||||||||||||||||||||||||||
Add back noncontrolling interests component |
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| 3 | |||||||||||||||||||||||||||
Loss from discontinued operations, net of tax |
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| (3) | |||||||||||||||||||||||||||
Net income |
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| $ | 976 | |||||||||||||||||||||||||||
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(a) | On May 1, 2013, the PUCO approved a Duke Energy Ohio settlement agreement that provides for a net annual increase in electric distribution revenues of $49 million, beginning in May 2013. This rate increase impacts USFE&G. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | On May 30, 2013, the NCUC approved a Duke Energy Progress settlement agreement that included a $147 million increase in rates in the first year, beginning on June 1, 2013. This rate increase impacts USFE&G. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | USFE&G recorded an after-tax impairment charge of $180 million, net of tax of $115 million, related to Duke Energy Florida's Crystal River Unit 3. See Note 4 for additional information. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(d) | USFE&G recorded an after-tax impairment charge of $13 million, net of tax of $9 million, related to the letter Duke Energy Progress filed with the NRC requesting the NRC to suspend its review activities associated with the combined construction and operating license (COL) at the Shearon Harris Nuclear Station (Harris) site. USFE&G also recorded an after-tax impairment charge of $44 million, net of tax of $21 million, related to the write-off of the wholesale portion of Levy investments at Duke Energy Florida in accordance with the 2013 Settlement. See Note 4 for additional information. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(e) | Other includes after-tax costs to achieve the merger with Progress Energy of $85 million, net of tax of $52 million. See Note 2 for additional information about the merger. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
38
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
(in millions) | USFE&G |
| Commercial Power |
| International Energy |
| Total Reportable Segments |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||||||||||||||
Unaffiliated revenues(a) | $ | 5,348 |
| $ | 1,052 |
| $ | 799 |
| $ | 7,199 |
| $ | 8 |
| $ | ― |
| $ | 7,207 | |||||||||||||||||||||||||||||
Intersegment revenues |
| 17 |
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| 30 |
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| 47 |
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| 23 |
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| Total revenues | $ | 5,365 |
| $ | 1,082 |
| $ | 799 |
| $ | 7,246 |
| $ | 31 |
| $ | (70) |
| $ | 7,207 | ||||||||||||||||||||||||||||
Segment income(a)(b) | $ | 473 |
| $ | 59 |
| $ | 247 |
| $ | 779 |
| $ | (41) |
| $ | ― |
| $ | 738 | |||||||||||||||||||||||||||||
Add back noncontrolling interests component |
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Income from discontinued operations, net of tax |
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Net income |
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(a) | On January 25, 2012 and January 27, 2012, the Duke Energy Carolinas' South Carolina and North Carolina rate case settlement agreements were approved by the PSCSC and NCUC, respectively. Among other things, the rate case settlements included an annual base rate increase of $309 million in North Carolina and a $93 million annual base rate increase in South Carolina, both beginning in February 2012. These rate increases impact USFE&G. | ||||||||||||||||||||||||||||||||||||||||||||||||
(b) | USFE&G recorded an after-tax impairment charge of $268 million, net of tax of $152 million, related to Duke Energy Indiana's Edwardsport Integrated Gasification Combined Cycle (IGCC) project. USFE&G also recorded the reversal of expenses of $60 million, net of tax of $39 million, related to a prior year Voluntary Opportunity Plan in accordance with Duke Energy Carolinas' 2011 rate case. | ||||||||||||||||||||||||||||||||||||||||||||||||
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DUKE ENERGY OHIO
Duke Energy Ohio has two reportable operating segments, Franchised Electric and Gas and Commercial Power.
Franchised Electric and Gas transmits and distributes electricity in southwesternportions of Ohio and generates, transmits, distributes and sells electricity in northernportions of Kentucky. Franchised Electric and Gas also transports and sells natural gas in southwesternportions of Ohio and northern Kentucky. It conducts operations primarily through Duke Energy Ohio and its wholly owned subsidiary Duke Energy Kentucky.
30
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
Commercial Power owns, operates and manages power plants and engages in the wholesale marketing and procurement of electric power,electricity, fuel and emission allowances related to these plants, as well as other contractual positions. Duke Energy Ohio’s Commercial Power reportable operating segment does not include the operations of DEGS or Duke Energy Retail, which isare included in the Commercial Power reportable operating segment at Duke Energy.
The remainder of Duke Energy Ohio’s operations is presented as Other. While it is not considered an operating segment, Other primarily includes certain allocated governance costs allocated by its parent,costs. See Note 17 for additional information. All of Duke Energy (see Note 17).
Ohio’s revenues are generated domestically and its long-lived assets are all in the U.S.
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(in millions) | June 30, 2012 |
| December 31, 2011 | |||||
Franchised Electric and Gas |
| $ | 6,559 |
| $ | 6,293 | ||
Commercial Power |
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| 4,742 |
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| 4,740 | ||
| Total reportable segments |
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| 11,301 |
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| 11,033 | |
Other |
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| 142 |
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| 259 | ||
Reclassifications(a) |
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| (353) | ||
| Total consolidated assets |
| $ | 10,978 |
| $ | 10,939 | |
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(a) | Primarily represents reclassification of federal tax balances in consolidation. |
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| Three Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Franchised Electric and Gas |
| Commercial Power |
| Total Reportable Segments |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||
Unaffiliated revenues(a) | $ | 404 |
| $ | 407 |
| $ | 811 |
| $ | ― |
| $ | ― |
| $ | 811 | ||||||||||||||||||||||||||||||||||||||||
Intersegment revenues |
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| 8 |
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| 8 |
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| Total revenues | $ | 404 |
| $ | 415 |
| $ | 819 |
| $ | ― |
| $ | (8) |
| $ | 811 | |||||||||||||||||||||||||||||||||||||||
Segment income / Consolidated net income(a) | $ | 27 |
| $ | 35 |
| $ | 62 |
| $ | (4) |
| $ | ― |
| $ | 58 | ||||||||||||||||||||||||||||||||||||||||
Segment assets as of June 30, 2013 | $ | 6,568 |
| $ | 4,116 |
| $ | 10,684 |
| $ | 100 |
| $ | (178) |
| $ | 10,606 | ||||||||||||||||||||||||||||||||||||||||
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(in millions) | Franchised Electric and Gas |
| Commercial Power |
| Total Reportable Segments |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||
Unaffiliated revenues | $ | 387 |
| $ | 330 |
| $ | 717 |
| $ | ― |
| $ | ― |
| $ | 717 | ||||||||||||||||||||||||||||||||||||||||
Intersegment revenues |
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| 12 |
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| 12 |
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| Total revenues | $ | 387 |
| $ | 342 |
| $ | 729 |
| $ | ― |
| $ | (12) |
| $ | 717 | |||||||||||||||||||||||||||||||||||||||
Segment income / Consolidated net income | $ | 30 |
| $ | 17 |
| $ | 47 |
| $ | (2) |
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| $ | 45 | ||||||||||||||||||||||||||||||||||||||||
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(in millions) | Franchised Electric and Gas |
| Commercial Power |
| Total Reportable Segments |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||
Unaffiliated revenues(a) | $ | 896 |
| $ | 662 |
| $ | 1,558 |
| $ | ― |
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| $ | 1,558 | ||||||||||||||||||||||||||||||||||||||||
Intersegment revenues |
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| 19 |
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| Total revenues | $ | 896 |
| $ | 681 |
| $ | 1,577 |
| $ | ― |
| $ | (19) |
| $ | 1,558 | |||||||||||||||||||||||||||||||||||||||
Segment income / Consolidated net income(a) | $ | 80 |
| $ | (33) |
| $ | 47 |
| $ | (10) |
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| $ | 37 | ||||||||||||||||||||||||||||||||||||||||
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(a) | On May 1, 2013, the PUCO approved a Duke Energy Ohio settlement agreement that provides for a net annual increase in electric distribution revenues of $49 million, beginning in May 2013. This rate increase impacts Franchised Electric and Gas. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(in millions) | Franchised Electric and Gas |
| Commercial Power |
| Total Reportable Segments |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||
Unaffiliated revenues | $ | 860 |
| $ | 769 |
| $ | 1,629 |
| $ | ― |
| $ | ― |
| $ | 1,629 | ||||||||||||||||||||||||||||||||||||||||
Intersegment revenues |
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| 27 |
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| 27 |
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| Total revenues | $ | 860 |
| $ | 796 |
| $ | 1,656 |
| $ | ― |
| $ | (27) |
| $ | 1,629 | |||||||||||||||||||||||||||||||||||||||
Segment income / Consolidated net income | $ | 64 |
| $ | 61 |
| $ | 125 |
| $ | (6) |
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| $ | 119 | ||||||||||||||||||||||||||||||||||||||||
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3139
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
Duke Energy Carolinas and Duke Energy IndianaDUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA AND DUKE ENERGY INDIANA
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana each have one reportable operating segment, Franchised Electric, which generates, transmits, distributes and sells electricity in central and western North Carolina and western South Carolina, and north central, central and southern Indiana, respectively.
electricity. The remainder of Duke Energy Carolinas’ and Duke Energy Indiana’seach company’s operations are presentedis classified as Other. While it is not considered an operating segment,reportable segments for any of these companies, Other primarily includesconsists of each respective company’s share of costs to achieve certain mergersthe merger between Duke Energy and divestitures,Progress Energy, certain corporate severance programs, and certain costs for use of corporate assets as allocated to Dukeeach company. See Note 17 for additional information. Other for Progress Energy Carolinas or Duke Energy Indiana.also includes interest expense on corporate debt instruments. The following table summarizes the net loss for Other at each of these registrants.
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(in millions) |
| 2013 |
| 2012 |
| 2013 |
| 2012 | ||||||||||||||||
Duke Energy Carolinas |
| $ | (25) |
| $ | (11) |
| $ | (43) |
| $ | (18) | ||||||||||||
Progress Energy |
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| (55) |
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| (58) |
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Duke Energy Progress |
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Duke Energy Florida |
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Duke Energy Indiana |
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At June 30, 2012 and December 31, 2011The Franchised Electric operating segments includes substantially all of Duke Energy Carolinas’, Progress Energy’s, Duke Energy Progress’, Duke Energy Florida’s and Duke Energy Indiana’s assets are each owned by the Franchised Electric operating segment. For the three and six months ended June 30, 2012 and 2011, substantially all revenues and expenses are from the Franchised Electric operating segment of each registrant.assets.
4. Regulatory MattersREGULATORY MATTERS
Rate Related Information.RATE RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO and KPSC approve rates for retail electric and gas services within their states. Non-regulatedNonregulated sellers of gas and electric generation are also allowed to operate in Ohio once certified by the PUCO. The FERC approves rates for electric sales to wholesale customers served under cost-based rates, as well as sales of transmission service.
Duke Energy Ohio Standard Service Offer (SSO). Carolinas
The PUCO approved2013 North Carolina Rate Case
On June 17, 2013, Duke Energy Ohio’s current ESPCarolinas filed a settlement agreement with the NCUC detailing the terms of a settlement with the North Carolina Utilities Commission Public Staff (Public Staff) in connection with its rate case filed on November 22, 2011.February 4, 2013. Pursuant to the settlement agreement, the parties have agreed to a three year step-in, with the first two years providing for $205 million, or a 4.5 percent average increase in rates, and the third year providing for rates to be increased by an additional $30 million, or 0.6 percent. The ESP effectively separatessettlement agreement is based upon a return on equity of 10.2 percent and an equity component of the generationcapital structure of electricity from53 percent. The settlement agreement allows for the recognition of nuclear outage expenses over the refueling cycle rather than when the outage occurs. In order to mitigate the impact of the increase on customers, the settlement agreement provides for a $10 million shareholder contribution to agencies that provide energy assistance to low-income customers, and an annual reduction in the regulatory liability for costs of removal of $30 million for each of the first two years. Duke Energy Ohio’s retail load obligation and requires Duke Energy OhioCarolinas also agreed not to transfer its generation assetsrequest additional base rate increases before September 2015. The settlement agreement is subject to a non-regulated affiliate on or before December 31, 2014.approval by the NCUC. The ESP includes competitive auctions for electricity supply whereby the energy price is recovered from retail customers. As a result, Duke Energy Ohio now earns retail marginNCUC held an evidentiary hearing on the transmissionsettlement agreement and distribution of electricity only and not onother issues in the cost of the underlying energy. New rates for Duke Energy Ohio went into effect for SSO customers on January 1, 2012. The ESP also includes a provision for a non-bypassable stability charge of $110 million per year to be collected from January 1, 2012 through December 31, 2014.case in July 2013.
40
On January 18, 2012, the PUCO denied a request for rehearing of its decision on Duke Energy Ohio’s ESP filed by Columbus Southern Power and Ohio Power Company.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Duke Energy Ohio Generation Asset Transfer.Combined Notes to Condensed Consolidated Financial Statements – (Continued) On April 2, 2012, Duke Energy Ohio and various affiliated entities filed an Application for Authorization for Disposition of Jurisdictional Facilities with FERC. The application seeks to transfer, from Duke Energy Ohio’s rate-regulated Ohio utility company, the legacy coal-fired and combustion gas turbine assets to a non-regulated affiliate, consistent with ESP stipulation approved on November 22, 2011. The application outlines a potential additional step in the reorganization that would result in a transfer of all of Duke Energy Ohio’s Commercial Power business to an indirect wholly owned subsidiary of Duke Energy as early as October 2012. The process of determining the optimal corporate structure is an ongoing evaluation of factors, such as tax considerations, that may change between now and the transfer date. In conjunction with the transfer, Duke Energy Ohio’s capital structure will be restructured to reflect appropriate debt and equity ratios for its regulated Franchised Electric and Gas operations. The transfer could instead be accomplished within a wholly owned non-regulated subsidiary of Duke Energy Ohio depending on final tax structuring analysis. Duke Energy Ohio requested the FERC to rule on the application within 90 days. On June 22, 2012, Duke Energy Ohio amended its Application to include several small additional generation units to be transferred. Duke Energy Ohio requested FERC to rule on its amended Application by August 1, 2012.
(Unaudited)
Duke Energy Ohio ElectricCarolinas expects revised rates, if approved, to go into effect late third quarter of 2013.
2013 South Carolina Rate Case. Case
On July 9, 2012,23, 2013, Duke Energy OhioCarolinas filed an applicationa settlement agreement with the PUCOPSCSC detailing the terms of a settlement with the Office of Regulatory Staff, Wal-Mart Stores East, LP and Sam’s East, Incorporated, the South Carolina Energy Users Committee, Public Works of the City of Spartanburg, South Carolina and the South Carolina Small Business Chamber of Commerce in connection with its rate case filed on March 18, 2013. Pursuant to the settlement agreement, the parties have agreed to a two year step-in, with the first year providing for anapproximately $80 million, or a 5.53 percent average increase in electric distribution rates, and the second year providing for rates to be increased by an additional $38 million, or 2.63 percent. The settlement agreement is based upon a return on equity of 10.2 percent and a 53 percent equity component of the capital structure. The settlement agreement allows for the recognition of nuclear outage expenses over the refueling cycle rather than when the outage occurs. In order to mitigate the impact of the increase on customers, the settlement agreement provides for approximately $87 million. On average, total electric rates would increase approximately 5.1% under the filing. The rate increase is designed$4 million of contributions to recover the cost of investments in projectsagencies that provide energy assistance to improve reliability forlow-income customers and upgrades tofor economic development, and a reduction in the distribution system. Pursuant to a stipulation in another case,regulatory liability for costs of removal of $45 million for the first year. Duke Energy Ohio will continue recovering its costs associated with grid modernizationCarolinas also agreed not to request additional base rate increases before September 2015. The settlement agreement is subject to approval by the PSCSC. The PSCSC held an evidentiary hearing on the settlement agreement and other issues in a separate rider.the case on July 31, 2013.
Duke Energy OhioCarolinas expects revised rates, would likelyif approved, to go into effect in earlylate third quarter of 2013.
Duke Energy Ohio Natural Gas Rate Case. On July 9, 2012, Duke Energy Ohio filed an application with the PUCO for an increase in natural gas distribution rates of approximately $45 million. On average, total natural gas rates would increase approximately 6.6% under the filing. The rate increase is designed to recover the cost of upgrades to the distribution system, as well as environmental cleanup of manufactured gas plant sites. In addition to the recovery of costs associated with the manufactured gas plants, the rate request includes a proposal for an accelerated service line replacement program that would allow smaller annual increases to reflect increased investment in the distribution system. The filing also requests that the PUCO renew the rider recovery of Duke Energy Ohio’s accelerated main replacement program and grid modernization program.
Duke Energy Ohio expects revised rates would likely go into effect in early 2013.
Duke Energy Carolinas2011 North Carolina Rate Case. Case
On January 27, 2012, the NCUC approved a settlement agreement between Duke Energy Carolinas and the North Carolina Utilities Public Staff (Public Staff). The terms of the agreement include an average 7.2% increase in retail revenues, or approximately $309 million annually beginning in February 2012. The agreement includesfor a 10.5% return on equity and a capital structure of 53% equity and 47% long-term debt. In order to mitigate the impact of the increase on customers, the agreement provides for (i) Duke Energy to waive its right to increase the amount of construction work in progress in rate base for any expenditures associated with Cliffside Unit 6 above the North Carolina retail portion included in the 2009 North Carolina Rate Case, (ii) the accelerated return of certain regulatory liabilities, related to accumulated EPA sulfur dioxide auction proceeds, to customers, which lowered the total impact to customer bills to an increase of approximately 7.2% in the near-term; and (iii) an $11 million shareholder contribution to agencies that provide energy assistance to low income customers. In exchange for waiving the right to increase the amount of construction work in process for Cliffside Unit 6, Duke Energy will continue to capitalize AFUDC on all expenditures associated with Cliffside Unit 6 not included in rate base as a result of the 2009 North Carolina Rate Case.
32
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
increase. On March 28, 2012, the North Carolina Attorney General (NCAG) filed a notice of appeal with the NCUC challenging the rate of return approved in the agreement. On April 17, 2012,12, 2013, the NCUC denied Duke Energy Carolinas’ request to dismiss the notice of appeal. The North Carolina Supreme Court which is hearing(NCSC) issued a decision requiring the appeal, recently docketedNCUC to make an independent determination regarding the appeal with briefs due August 22, 2012. Reply briefs are due 30 days later. The court is expected to set a hearing date in late fall.
Duke Energy Carolinas South Carolina Rate Case. On January 25, 2012, the PSCSC approved a settlement agreement between Duke Energy Carolinas and the Office of Regulatory Staff (ORS), Wal-Mart Stores East, LP (Wal-Mart), and Sam’s East, Inc (Sam’s). The Commission of Public Works for the city of Spartanburg, South Carolina and the Spartanburg Sanitary Sewer District were not parties to the agreement; however, they did not object to the agreement. The terms of the agreement include an average 5.98% increase in retail and commercial revenues, or approximately $93 million annually beginning February 6, 2012. The agreement includes a 10.5%proper return on equity,equity. The NCSC stated the determination should be based upon appropriate findings of fact that weigh all the available evidence, including the impact of changing economic conditions on customers. On April 29, 2013, the NCAG filed a capital structure of 53% equity and 47% long-term debt, and a contribution of $4 million to AdvanceSC.
Capital Expansion Projects.
Duke Energy Carolinas Cliffside Unit 6. On March 21, 2007, the NCUC issued an order allowing Duke Energy Carolinas to build an 800 MW coal-fired unit. Following final equipment selection and the completion of detailed engineering, Cliffside Unit 6 is expected to have a net output of 825 MW. On January 31, 2008, Duke Energy Carolinas filed its updated cost estimate of $1.8 billion (excluding AFUDC of $600 million) for Cliffside Unit 6. In March 2010, Duke Energy Carolinas filed an update to the cost estimate of $1.8 billion (excluding AFUDC)motion with the NCUC where it reduced the estimated AFUDC financing costs to $400 million asrequesting a resultstay of the December 2009 rate case settlement with the NCUC that allowed the inclusion of construction work in progress in rate base prospectively. Duke Energy Carolinas believes that the overall cost of Cliffside Unit 6 will be reduced by $125 million in federal advanced clean coal tax credits, as discussed in Note 5. Cliffside Unit 6 is expected to begin commercial operation in the fall of 2012.
Duke Energy Carolinas Dan River Combined Cycle Facility. In June 2008, the NCUC issued its order approving the Certificate of Public Convenience and Necessity (CPCN) applications to construct a 620 MW combined cycle natural gas fired generating facility at Duke Energy Carolinas’ existing Dan River Steam Station. The Division of Air Quality (DAQ) issued a final air permit authorizing construction of the Dan River combined cycle natural gas-fired generating unit in August 2009.
The Dan River project is expected to begin operation by the end of 2012. Based on the most updated cost estimates, total costs (including AFUDC) for the Dan River project are $710 million.
Duke Energy Indiana Edwardsport IGCC Plant. On September 7, 2006, Duke Energy Indiana and Southern Indiana Gas and Electric Company d/b/a Vectren Energy Delivery of Indiana (Vectren) filed a joint petition with the IURC seeking a CPCN for the construction of a 618 MW IGCC power plant at Duke Energy Indiana’s Edwardsport Generating Station in Knox County, Indiana. The facility was initially estimated to cost approximately $1.985 billion (including $120 million of AFUDC). In August 2007, Vectren formally withdrew its participation in the IGCC plant and a hearing was conducted on the CPCN petition based on Duke Energy Indiana owning 100% of the project. On November 20, 2007, the IURC issued an order granting Duke Energy Indiana a CPCN for the proposed IGCC project, approved the cost estimate of $1.985 billion and approved the timely recovery of costs related to the project. On January 25, 2008, Duke Energy Indiana received the final air permit from the Indiana Department of Environmental Management. The Citizens Action Coalition of Indiana, Inc. (CAC), Sierra Club, Inc., Save the Valley, Inc., and Valley Watch, Inc., all intervenors in the CPCN proceeding, have appealed the air permit.
On May 1, 2008, Duke Energy Indiana filed its first semi-annual IGCC rider and ongoing review proceeding with the IURC as required under the CPCN order issued by the IURC. In its filing, Duke Energy Indiana requested approval of a new cost estimate for the IGCC project of $2.35 billion (including $125 million of AFUDC) and for approval of plans to study carbon capture as required by the IURC’s CPCN order. On January 7, 2009, the IURC approved Duke Energy Indiana’s request, including the new cost estimate of $2.35 billion, and cost recovery associated with a study on carbon capture. On November 3, 2008 and May 1, 2009, Duke Energy Indiana filed its second and third semi-annual IGCC riders, respectively, both of which wereincrease approved by the IURCNCUC and implemented in full.
2012. The NCAG also requested the NCUC to provide the parties guidance with respect to further evidentiary hearings at which new evidence would be introduced. On November 24, 2009, Duke Energy Indiana filed a petition for its fourth semi-annual IGCC rider and ongoing review proceeding withMay 20, 2013, the IURC. As Duke Energy Indiana experienced design modifications, quantity increases and scope growth above what was anticipated from the preliminary engineering design, capital costs to the IGCC project were anticipated to increase. Duke Energy Indiana forecastedNCUC ruled that the additional capital cost itemsrate increase would use the remaining contingency and escalation amountsstay in the current $2.35 billion cost estimate and add $150 million, excluding the impact associated with the need to add more contingency. Duke Energy Indiana did not request approval of an increased cost estimate in the fourth semi-annual update proceeding; rather, Duke Energy Indiana requested, and the IURC approved, a subdocket proceeding in which Duke Energy Indiana would present additional evidence regarding an updated estimated cost for the IGCC project and in which a more comprehensive review of the IGCC project could occur. The evidentiary hearing for the fourth semi-annual update proceeding was held April 6, 2010, and an interim order was received on July 28, 2010. The order approves the implementation of an updated IGCC rider to recover costs incurred through September 30, 2009, effective immediately. The approvals are on an interim basiseffect pending the outcome of the sub-docket proceeding involving the revised cost estimate as discussed further below.
On April 16, 2010,review. Duke Energy Indiana filed a revised cost estimate forCarolinas cannot predict the IGCC project reflecting an estimated cost increaseoutcome of $530 million.these proceedings.
V.C. Summer Nuclear Station Letter of Intent
In July 2011, Duke Energy Indiana requested approvalCarolinas signed a letter of the revised cost estimate of $2.88 billion (including $160 million of AFUDC), and for continuation of the existing cost recovery treatment. A major driver of the cost increase included quantity increases and design changes, which impacted the scope, productivity and schedule of the IGCC project. On September 17, 2010, an agreement was reachedintent with the OUCC, Duke Energy Indiana Industrial Group and Nucor Steel — Indiana to increase the authorized cost estimate of $2.35 billion to $2.76 billion, and to cap the project’s costs that could be passed on to customers at $2.975 billion. Any construction cost amounts above $2.76 billion would be subject to a prudence review similar to most other rate base investments in Duke Energy Indiana’s next general rate increase request before the IURC. Duke Energy Indiana agreed to accept a 150 basis point reduction in the equity return for any project construction costs greater than $2.35 billion. Additionally, Duke Energy Indiana agreed not to file for a general rate case increase before March 2012. Duke Energy Indiana also agreed to reduce depreciation rates earlier than would otherwise be required and to forego a deferred tax incentiveSantee Cooper related to the IGCC project. As a result of the settlement, Duke Energy Indiana recorded a pre-tax charge to earnings of approximately $44 million in the third quarter of 2010 to reflect the impact of the reduction in the return on equity. Due to the IURC investigation discussed below, the IURC convened a technical conference on November 3, 2010, related to the continuing need for the Edwardsport IGCC facility. On December 9, 2010, the parties to the settlement withdrew the settlement agreement to provide an opportunity to assess whether and to what extent the settlement agreement remained a reasonable allocation of risks and rewards and whether modifications to the settlement agreement
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were appropriate. Management determined that the approximate $44 million charge discussed above was not impactedpotential acquisition by the withdrawal of the settlement agreement.
During 2010, Duke Energy Indiana filed petitions for its fifth and sixth semi-annual IGCC riders. Evidentiary hearings were held on April 24, 2012 and April 25, 2012.
The CAC, Sierra Club, Inc., Save the Valley, Inc., and Valley Watch, Inc. filed motions for two subdocket proceedings alleging improper communications, undue influence, fraud, concealment and gross mismanagement, and a request for field hearing in this proceeding. Duke Energy Indiana opposed the requests. On February 25, 2011, the IURC issued an order which denied the request for a subdocket to investigate the allegations of improper communications and undue influence at this time, finding there were other agencies better suited for such investigation. The IURC also found that allegations of fraud, concealment and gross mismanagement related to the IGCC project should be heard in a Phase II proceeding of the cost estimate subdocket and set evidentiary hearings on both Phase I (cost estimate increase) and Phase II beginning in August 2011. After procedural delays, hearings were held on Phase I on October 26, 2011 and on Phase II on November 21, 2011.
On March 10, 2011, Duke Energy Indiana filed testimony with the IURC proposing a framework designed to mitigate customer rate impacts associated with the Edwardsport IGCC project. Duke Energy Indiana’s filing proposed a cap on the project’s construction costs, (excluding financing costs), which can be recovered through rates at $2.72 billion. It also proposed rate-related adjustments that will lower the overall customer rate increase related to the project from an average of 19% to approximately 16%.
On June 27, 2011, Duke Energy Indiana filed testimony with the IURC in connection with its seventh semi-annual rider request which included an update on the current cost forecast of the Edwardsport IGCC project. The updated forecast excluding AFUDC increased from $2.72 billion to $2.82 billion, not including any contingency for unexpected start-up events. On June 30, 2011, the OUCC and intervenors filed testimony in Phase I recommending that Duke Energy Indiana be disallowed cost recovery of any of the additional cost estimate increase above the previously approved cost estimate of $2.35 billion. Duke Energy Indiana filed rebuttal testimony on August 3, 2011.
On November 30, 2011, Duke Energy Indiana filed a petition with the IURC in connection with its eighth semi-annual rider request for the Edwardsport IGCC project. Evidentiary hearings for the seventh and eighth semi-annual rider requests are scheduled for August 6, 2012 and August 7, 2012.
In the subdocket proceeding, on July 14, 2011, the OUCC and certain intervenors filed testimony in Phase II alleging that Duke Energy Indiana concealed information and grossly mismanaged the project, and therefore Duke Energy Indiana should only be permitted to recover from customers $1.985 billion, the original IGCC project cost estimate approved by the IURC. Other intervenors recommended that Duke Energy Indiana not be able to rely on any cost recovery granted under the CPCN or the first cost increase order. Duke Energy Indiana believes it has diligently and prudently managed the project. On September 9, 2011, Duke Energy defended against the allegations in its responsive testimony. The OUCC and intervenors filed their final rebuttal testimony in Phase II on or before October 7, 2011, making similar claims of fraud, concealment and gross mismanagement and recommending the same outcome of limiting Duke Energy Indiana’s recovery to the $1.985 billion initial cost estimate. Additionally, the CAC recommended that recovery be limited to the costs incurred on the IGCC project as of November 30, 2009 (Duke Energy Indiana estimates it had committed costs of $1.6 billion), with further IURC proceedings to be held to determine the financial consequences of this recommendation.
On October 19, 2011, Duke Energy Indiana revised its project cost estimate from approximately $2.82 billion, excluding financing costs, to approximately $2.98 billion, excluding financing costs. The revised estimate reflects additional cost pressures resulting from quantity increases and the resulting impact on the scope, productivity and schedule of the IGCC project. Duke Energy Indiana previously proposed to the IURC a cost cap of approximately $2.72 billion, plus the actual AFUDC that accrues on that amount. As a result, Duke Energy Indiana recorded a pre-tax impairment charge of approximately $222 million in the third quarter of 2011 related to costs expected to be incurred above the cost cap. This charge is in addition to a pre-tax impairment charge of approximately $44 million recorded in the third quarter of 2010 as discussed above. The cost cap, if approved by the IURC, limits the amount of project construction costs that may be incorporated into customer rates in Indiana. As a result of the proposed cost cap, recovery of these cost increases is not considered probable. Additional updates to the cost estimate could occur through the completion of the plant in 2012.
Phase I and Phase II hearings concluded on January 24, 2012. The CAC has filed repeated requests for the IURC to consider issues of ethics, undue influence, due process violations and appearance of impropriety. The IURC denied the most recent motion in March 2012. In April 2012, the CAC filed a motion requesting the IURC to certify questions of law for appeal regarding allegations of fraud on the commission and due process violations. This motion was denied.
On April 30, 2012, Duke Energy Indiana entered into a settlement agreement with the OUCC, the Duke Energy Indiana Industrial Group and Nucor Steel-Indiana on the cost increase for construction of the Edwardsport IGCC plant, including both Phase I and Phase II of the sub docket. Pursuant to the agreement, there would be a cap on costs to be reflected in customer rates of $2.595 billion, including estimated financing costs through June 30, 2012. Pursuant to the agreement, Duke Energy Indiana would be able to recover additional financing costs until customer rates are revised. Duke Energy Indiana also agrees not to request a retail electric base rate increase prior to March 2013, with rates in effect no earlier than April 1, 2014. The agreement is subject to approval by the IURC, and the settling parties have requested that schedule be set to hear evidence in support of the settlement agreement, which could allow for an IURC order as early as the summer of 2012. As a result of the agreement, Duke Energy Indiana recorded pre-tax impairment and other charges of approximately $420 million in the first quarter of 2012. Approximately $400 million is recorded in Impairment charges and the remaining approximately $20 million is recorded in Operation, maintenance and other on Duke Energy’s Condensed Consolidated Statement of Operations and in Duke Energy Indiana’s Condensed Consolidated Statements of Operations and Comprehensive Income. The $20 million recorded in Operation, maintenance and other, is attributed to legal fees Duke Energy Indiana will be responsible for on behalf of certain intervenors, as well as funding for low income energy assistance, as required by the settlement agreement. These charges are in addition to pre-tax impairment charges of approximately $222 million in the third quarter of 2011 and $44 million recorded in the third quarter of 2010, as discussed above.
The CAC, Sierra Club Indiana chapter, Save the Valley and Valley Watch, filed testimony in opposition to the April 30, 2012 settlement agreement contending the agreement should not be approved, and that the amount of costs recovered from customers should be less than what the settlement agreement provides, potentially even zero. In addition to reiterating their prior concerns with the Edwardsport IGCC project, the intervenors noted above also contend new settlement terms should be added to mitigate carbon emissions, conditions should be added prior to the plant being declared in-service and the IURC should consider their allegations of undue influence. Duke Energy Indiana, the Industrial Group and the OUCC, filed rebuttal testimony supporting the settlement as reasonable and in the public interest. An evidentiary hearing on the settlement agreement concluded on July 19,
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DUKE ENERGY INDIANA, INC.
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2012. Duke Energy Indiana, the Industrial Group and the OUCC will file a proposed order by August 17, 2012. A final order is expected by the end of the year.
On June 8, 2012, Duke Energy Indiana filed a petition with the IURC in connection with its ninth semi-annual rider request for the Edwardsport IGCC project. Evidentiary hearings for the ninth semi-annual rider requests are scheduled for January 14, 2013 and January 15, 2013.
Duke Energy is unable to predict the ultimate outcome of these proceedings. In the event the IURC disallows a portion of the remaining plant costs, including financing costs, or if cost estimates for the plant increase, additional charges to expense, which could be material, could occur. Construction of the Edwardsport IGCC plant is ongoing and the expected in-service date for the plant has been delayed from the fourth quarter of 2012 to the first quarter of 2013. The impact of this delay on the cost of the plant is currently being analyzed but cannot be determined at this time.
Duke Energy Carolinas of a 5 percent to 10 percent ownership interest in the V.C. Summer Nuclear Station being developed by Santee Cooper and South Carolina Electric and Gas (SCE&G) near Jenkinsville, South Carolina. The letter of intent provided a path for Duke Energy Carolinas to conduct the necessary due diligence to determine whether future participation in this project is beneficial for its customers. On November 7, 2012, the term of the letter of intent expired, though Duke Energy Carolinas remains engaged in discussions at this time.
William States Lee III Nuclear Station. Station
In December 2007, Duke Energy Carolinas filed an application with the NRC, which has been docketed for review, for a combined Construction and Operating License (COL)COL for two Westinghouse AP1000 (advanced passive) reactors for the proposed William States Lee III Nuclear Station (Lee Nuclear Station) at a site in Cherokee County, South Carolina. Each reactor is capable of producing 1,117 MW. Submitting the COL application does not commit Duke Energy Carolinas to build nuclear units. Through several separate orders, the NCUC and PSCSC have concurred with the prudency of Duke Energy Carolinas incurring certain project development and pre-construction costs.
As of June 30, 2013, Duke Energy Carolinas V.C. Summer Nuclear Station Letter of Intent. In July 2011, Duke Energy Carolinas signed a letter of intent with Santee Cooper related to the potential acquisition by Duke Energy Carolinas of a 5% to 10% ownership interesthas incurred approximately $350 million, including allowance for funds used during construction (AFUDC), which is included in the V.C. Summer Nuclear Station being developed by Santee CooperNet property, plant and SCE&G near Jenkinsville, South Carolina. The letter of intent provides a path for Duke Energy Carolinas to conduct the necessary due diligence to determine if future participation in this project is beneficial for its customers.
Potential Plant Retirements.
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (15-20 years), and options being considered to meet those needs. The IRP’s filed by the Subsidiary Registrants in 2011 and 2010 included planning assumptions to potentially retire by 2015, certain coal-fired generating facilities in North Carolina, South Carolina, Indiana and Ohio that do not have the requisite emission control equipment primarily to meet EPA regulations that are not yet effective.
Duke Energy classifies generating facilities that are still operating but are expected to be retired significantly before the end of their previously estimated useful lives as Generation facilities to be retired, net, on the Condensed Consolidated Balance Sheets. Amounts are reclassified
The Lee COL application is impacted by the ongoing activity by the NRC to address its Waste Confidence rule, a generic finding by the NRC that spent fuel can be managed safely until ultimate disposal. The rule has been remanded to the NRC by the U.S. Court of Appeals for the District of Columbia (D.C. Circuit). In response to the court’s remand and in connection with numerous petitions asserting waste confidence contentions, including in the Lee proceeding, the NRC determined that no final licenses for new reactors would be issued until the remand is appropriately addressed. In September 2012, the NRC provided a timeline of 24 months from the costtime of its order for the staff to finish the generic Environmental Impact Study and accumulated depreciationpublish a final Waste Confidence rule. Assuming the NRC uses the entire 24 month period for promulgation of Property, planta new rule, licenses would not be issued until September 2014 at the earliest. The COL is also impacted by the time required to fully respond to an NRC request for additional information that addresses seismic hazard evaluation resulting from recommendations of the Fukushima Near-Term Task Force. Due to the schedule for both fully responding and equipment when it becomes probablefor NRC review of the plant will be retired. response, the Lee COL is not expected until 2016.
Duke Energy continues to depreciate these generating facilities based on current depreciable lives. When such facilities are removed from service, the remaining net carrying value, if any, is then reclassified to regulatory assets, in accordance with the expected ratemaking treatment.
The table below contains the net carrying value of generating facilities being evaluated for potential retirement included in the Condensed Consolidated Balance Sheets.
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Other Matters.Progress
Progress Energy Merger NCUC and2012 North Carolina Department of Justice (NCDOJ) Investigations.Rate Case
On July 6, 2012,May 30, 2013, the NCUC issued an order initiating investigationapproved a settlement agreement between Duke Energy Progress and scheduling hearings addressing the timingPublic Staff. The terms of the Duke Energy board of directors’ decision on July 2, 2012,agreement include a two year step-in, with the first year providing for a $147 million, or a 4.5 percent average increase in rates, and the second year providing for rates to replace William D. Johnson with James E. Rogers as President and Chief Executive Officer (CEO)be increased by an additional $31 million, or a 1.0 percent average increase in rates. The second year increase is a result of Duke Energy as well as other related matters.
PursuantProgress agreeing to delay collection of financing costs on the mergerconstruction work in progress for the L.V. Sutton (Sutton) combined cycle facility for one year. The agreement William D. Johnson, Chairman, Presidentis based upon a return on equity of 10.2 percent and CEO of Progress Energy became President and CEO of Duke Energy and James E. Rogers, Chairman, President and CEO of Duke Energy became Executive Chairman of Duke Energy upon closean equity component of the merger. Mr. Johnson subsequently resigned ascapital structure of 53 percent. The settlement agreement allows for the President and CEOrecognition of Duke Energy, effective July 3, 2012.
Pursuant tonuclear outage expenses over the NCUC’s July 6, 2012 order, Mr. Rogers appeared before the NCUC on July 10, 2012, and provided testimony regarding the approval and closing of the merger and his replacement of Mr. Johnson as the President and CEO of Duke Energy. On July 19, 2012, Mr. Johnson, as well as E. Marie McKee and James B. Hyler, Jr., both former members of the Progress Energy board of directors and current members of the post-merger Duke Energy board of directors, appeared before the NCUC. Ann M. Gray and Michael G. Browning, both members of the pre-merger and post-merger Duke Energy board of directors, appeared before the NCUC on July 20, 2012. All provided testimony on the timing of the decision to replace Mr. Johnson with Mr. Rogers, as well as other related matters.refueling cycle
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– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
rather than when the outage occurs. In order to mitigate the impact of the increase on customers, the agreement provides for a $20 million contribution to agencies that provide energy assistance to low-income customers, and a reduction in the regulatory liability for costs of removal of $20 million for the first year. New rates went into effect on June 1, 2013.
On July 1, 2013, the NCAG filed a notice of appeal with the NCUC challenging the rate of return and capital structure approved in the settlement agreement. Duke Energy Progress cannot predict the outcome of this matter.
L.V. Sutton Combined Cycle Facility
Duke Energy Progress is constructing a new 625 MW combined cycle natural gas-fired generating facility at its existing Sutton Steam Station in New Hanover County, North Carolina. Total estimated costs at final project completion (including AFUDC) for the Sutton project, which is approximately 88 percent complete, are $570 million. The NCUC’s orderSutton project is expected to be in service in the fourth quarter of 2013.
Shearon Harris Nuclear Station 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 Electric AP1000 reactors at Harris, which the NRC has 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. As a result of the decision to suspend the COL applications, during the second quarter of 2013, Duke Energy Progress recorded a pretax impairment charge of $22 million, which represents costs associated with the COL, which are not probable of recovery. As of June 30, 2013, approximately $47 million is recorded in Regulatory assets on Duke Energy Progress’ Condensed Consolidated Balance Sheet.
Duke Energy Florida
FPSC Settlement Agreements
On February 22, 2012, the FPSC approved a Stipulation and Settlement Agreement (2012 Settlement) among Duke Energy Florida, the Florida Office of Public Counsel (OPC) and other customer advocates. The 2012 Settlement will continue through the last billing cycle of December 2016, unless replaced as discussed below. The agreement addresses four principal matters: (i) the Crystal River Unit 3 delamination prudence review then pending before the FPSC, (ii) certain customer rate matters, (iii) Duke Energy Florida’s proposed Levy Nuclear Station (Levy) cost recovery, and (iv) cost of removal reserve.
The FPSC has an open proceeding to review Duke Energy Florida’s February 2013 decision to retire Crystal River Unit 3, the mediated resolution of insurance claims with Nuclear Electric Insurance Limited (NEIL), the costs spent to repair Crystal River Unit 3 since the 2012 Settlement, the uprate project, and the amount of the regulatory asset to be placed in rates in 2017. On April 26, 2013, the FPSC set final hearings to resolve all remaining issues beginning October 21, 2013. On June 19, 2013, the FPSC granted a joint motion to extend the due dates for discovery and testimony by 30 days to allow time for the parties to finalize issues, coordinate depositions and discovery, and potentially resolve discovery disputes.
On August 1, 2013, Duke Energy Florida, OPC, and other customer advocates filed a Revised and Restated Stipulation and Settlement Agreement (2013 Settlement) with the FPSC. If approved, the 2013 Settlement will replace and supplant the 2012 Settlement and substantially resolve additional issues, including (i) matters related to Crystal River Unit 3, (ii) Levy, (iii) Crystal River 1 and 2 coal units, and (iv) future generation needs in Florida. The 2013 Settlement is subject to review and approval by the FPSC, which is expected by the end of 2013.
Refer to the remaining sections below for further discussion of these settlement agreements.
Crystal River Unit 3
In September 2009, Crystal River Unit 3 began an outage for normal refueling and maintenance as well as an uprate project to increase its generating capability and to replace two steam generators. During preparations to replace the steam generators, workers discovered a delamination, or separation, within the concrete at the periphery of the containment building, which resulted in an extension of the outage. After analysis, it was determined that the concrete delamination was caused by redistribution of stresses in the containment wall that occurred when an opening was created to accommodate the replacement of the unit’s steam generators. In March 2011, the work to return the plant to service was suspended after monitoring equipment identified a new delamination that occurred in a different section of the outer wall after the repair work was completed and during the late stages of retensioning the containment building. Crystal River Unit 3 remained out of service while Duke Energy Florida conducted an engineering analysis and review of the new delamination and evaluated possible repair options.
Subsequent to March 2011, monitoring equipment detected additional changes and further damage in the partially tensioned containment building. Duke Energy Florida developed a repair plan which had a preliminary cost estimate of $900 million to $1.3 billion.
On February 5, 2013, following the completion of a comprehensive analysis and an independent review by Zapata Incorporated which estimated repair costs to be between $1.49 billion and $3.43 billion depending on the repair scope selected, Duke Energy Florida announced its intention to retire Crystal River Unit 3. Duke Energy Florida concluded that it did not have a high degree of confidence that repair could be successfully completed and licensed within estimated costs and schedule, and that it was in the best interests of Duke Energy Florida’s customers, joint owners, and Duke Energy’s investors to retire the unit. On February 20, 2013, Duke Energy Florida filed with the NRC a certification of permanent cessation of power operations and permanent removal of fuel from the reactor vessel. Duke Energy Florida developed initial estimates of the cost to decommission the plant during its analysis of whether to repair or retire Crystal River Unit 3. With the final decision to retire, Duke Energy Florida is working to develop a comprehensive decommissioning plan, which will evaluate various decommissioning options and costs associated with each option. The plan will determine resource needs as well as the scope, schedule and
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Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
other elements of decommissioning. Duke Energy Florida intends to use a safe storage (SAFSTOR) option for decommissioning. Generally, SAFSTOR involves placing the facility into a safe storage configuration, requiring limited staffing to monitor plant conditions, until the eventual dismantling and decontamination activities occur, usually in 40 to 60 years. This decommissioning approach is currently utilized at a number of retired domestic nuclear power plants and is one of three generally accepted approaches to decommissioning approved by the NRC. Once an updated site specific decommissioning study is completed it will be filed with the FPSC. As part of the evaluation of repairing Crystal River Unit 3, initial estimates of the cost to decommission the plant under the SAFSTOR option were developed which resulted in an estimate in 2011 dollars of $989 million. Additional specifics about the decommissioning plan are being developed.
At the time of the delamination, Duke Energy Florida maintained insurance coverage through NEIL’s accidental property damage program, which provided insurance coverage up to $2.25 billion with a $10 million deductible per claim. Duke Energy Florida currently maintains insurance through NEIL’s accidental property damage program provides coverage up to $1.06 billion with a $10 million deductible per claim. The NEIL coverage does not include property damage to or resulting from the containment structure except full limit coverage does apply to decontamination and debris removal if required following an accident to ensure public health and safety or if property damage results from a terrorism event.
Throughout the duration of the Crystal River Unit 3 outage, Duke Energy Florida worked with NEIL for recovery of applicable repair costs and associated replacement power costs. On April 25, 2013, pursuant to a settlement agreement between NEIL and Duke Energy Florida, NEIL paid Duke Energy Florida $530 million related to the Crystal River Unit 3 delaminations. Duke Energy Florida has received a total of $835 million in insurance proceeds from NEIL. In accordance with the 2012 Settlement, the majority of NEIL proceeds received were allocable to retail customers and have been applied to replacement power costs incurred after December 31, 2012 through December 31, 2016 and repair costs as appropriate. As a result, Duke Energy Florida recorded a regulatory liability of $490 million upon receipt of the April 2013 NEIL settlement proceeds. This amount is being refunded to retail customers through Duke Energy Florida’s fuel clause. Proceeds received from NEIL and the related refunds retail customers are presented in Operating Activities on Duke Energy Florida’s Condensed Statements of Cash Flows.
Because repairs to Crystal River Unit 3 did not begin prior to December 31, 2012, and the unit has subsequently been retired, per the 2012 Settlement, Duke Energy Florida will refund $100 million to retail customers through its fuel clause (retirement decision refund). Duke Energy Florida recorded a Regulatory liability for these refunds in the third quarter of 2012 related to these replacement power obligations.
Duke Energy Florida has reclassified all Crystal River Unit 3 investments, including property, plant and equipment, nuclear fuel, inventory, and other assets to a regulatory asset. In addition, as a result of Duke Energy Florida’s decision to retire Crystal River Unit 3, the 2012 Settlement authorizes Duke Energy Florida to defer the retail portion of all Crystal River Unit 3 related costs including, but not limited to, operations and maintenance and property tax costs in a regulatory asset. A regulatory liability must also requestsbe established to capture the difference between (i) actual incurred operations and maintenance and property tax costs in a given year and, (ii) the amount included in customer rates as established in Duke Energy Florida’s most recent fully litigated base rate proceeding, effective 2010. Beginning in February 2013, the retail portion of operations and maintenance costs and property taxes associated with Crystal River Unit 3 are being deferred to a regulatory asset. The 2013 Settlement terminates the regulatory asset and/or liability treatment for operating expenses incurred after December 31, 2013.
The 2013 Settlement resolves substantially all remaining issues in the FPSC proceeding related to the review of Duke Energy Florida’s decision to retire Crystal River Unit 3, the mediated resolution of insurance claims with NEIL, and the costs spent to repair Crystal River Unit 3 since the decision to retire the unit in February 2013; the uprate project; and the components of the regulatory asset to be recovered in rates beginning in 2017 via a separate base rate component.
Under the 2013 Settlement, Duke Energy Florida agrees to forego recovery of $295 million of the Crystal River Unit 3 regulatory asset. This excludes amounts related to the uprate project, which will continue to be recovered through the Nuclear Cost Recovery Clause (NCRC) over a seven year period, from 2013 through 2019. Duke Energy Florida recorded a $295 million pretax charge in the second quarter of 2013 for this matter. This amount in included in Impairment charges on Duke Energy Florida’s Condensed Statements of Operations and Comprehensive Income.
The 2013 Settlement allows Duke Energy Florida to accelerate cash recovery of approximately $135 million from retail customers from 2014 through 2016 of the Crystal River Unit 3 regulatory assets through its fuel clause.
The 2013 Settlement allows Duke Energy Florida to begin recovery of the remaining Crystal River Unit 3 regulatory asset, up to a cap of $1,466 million from retail customers upon the earlier of (i) full recovery of the uncollected Levy investment or (ii) the first billing period of January 2017. Recovery will continue 240 months from inception of the collection of the regulatory asset in base rates, and the Crystal River Unit 3 base rate component will be adjusted at least every four years. Included in this recovery, but not subject to the cap, are costs of building a dry cask storage facility for spent nuclear fuel, if needed. The return rate will be based on the currently approved AFUDC rate with a return on equity of 7.35 percent, or 70 percent of the currently approved 10.5 percent, subject to change if the return on equity changes in the future. Construction of the dry cask storage facility is subject to separate FPSC approval. The regulatory asset associated with the uprate project will continue to be recovered through the NCRC over an estimated seven year period beginning in 2013.
The following table includes the components of the Crystal River Unit 3 Regulatory assets recorded on Duke Energy Florida’s Condensed Balance Sheets.
(in millions) | June 30, 2013 | |||||||||||
Historical net book value(a) | $ | 1,036 | ||||||||||
Operating expense deferrals(b) | 96 | |||||||||||
Carrying charges(c) | 33 | |||||||||||
Amount subject to cost cap | 1,165 | |||||||||||
Uprate and dry cask storage projects | 332 | |||||||||||
Total regulatory asset | $ | 1,497 | ||||||||||
(a) | Includes amounts previously classified as plant in service, construction work in process, nuclear fuel and materials and supplies inventory. | |||||||||||
(b) | Includes operations and maintenance, property taxes and depreciation. | |||||||||||
(c) | See discussion under Customer Rate Matters section below. | |||||||||||
43
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following table includes a summary of the retail customer refunds agreed to in the 2012 Settlement and 2013 Settlement, amounts refunded to date and amounts to be refunded in future periods.
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| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||
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| Remaining Amount to be Refunded | |||||||||||||||||||||||||||||||||||||||||
(in millions) | Total |
| Refunded to date |
| 2013 |
| 2014 |
| 2015 |
| 2016 | ||||||||||||||||||||||||||||||||||||||
2012 Settlement refund(a) | $ | 288 |
| $ | 65 |
| $ | 64 |
| $ | 139 |
| $ | 10 |
| $ | 10 | ||||||||||||||||||||||||||||||||
Retirement decision refund |
| 100 |
|
| ― |
|
| ― |
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| ― |
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| 40 |
|
| 60 | ||||||||||||||||||||||||||||||||
NEIL proceeds |
| 490 |
|
| 163 |
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| 163 |
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| 164 |
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| ― |
|
| ― | ||||||||||||||||||||||||||||||||
Total customer refunds | $ | 878 |
|
| 228 |
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| 227 |
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| 303 |
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| 50 |
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| 70 | ||||||||||||||||||||||||||||||||
Accelerated regulatory asset recovery |
| (135) |
|
| ― |
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| ― |
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| (38) |
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| (38) |
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| (59) | ||||||||||||||||||||||||||||||||
Net customer refunds |
| 743 |
| $ | 228 |
| $ | 227 |
| $ | 265 |
| $ | 12 |
| $ | 11 | ||||||||||||||||||||||||||||||||
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(a) | See discussion under Customer Rate Matters section below. | ||||||||||||||||||||||||||||||||||
Duke Energy Florida is a party to a master participation agreement and other related agreements with the joint owners of Crystal River Unit 3 which convey certain rights and obligations on Duke Energy Florida and the joint owners. In December 2012, Duke Energy Florida reached an agreement with one group of joint owners related to all Crystal River Unit 3 matters, and is engaged in settlement discussions with the other major group of joint owners regarding resolution of matters associated with Crystal River Unit 3.
Duke Energy Florida cannot predict the outcome of the matters described above. In the event the FPSC rejects the 2013 Settlement, orders additional concessions, or if costs exceed the cap, additional charges to expense, which could be material, could occur.
Customer Rate Matters
In conjunction with the 2012 Settlement, Duke Energy Florida was to maintain base rates at then current levels through the last billing cycle of December 2016, except as described as follows. The agreement provided for a $150 million increase in revenue requirements effective with the first billing cycle of January 2013. Costs associated with Crystal River Unit 3 investments were removed from retail rate base effective with the first billing cycle of January 2013. Duke Energy Florida is accruing, for future rate-setting purposes, a carrying charge on the Crystal River Unit 3 investment until the Crystal River Unit 3 regulatory asset is recovered in base rates beginning with the first billing cycle of January 2017. If Duke Energy Florida’s retail base rate earnings fall below the return on equity range, as reported on a FPSC-adjusted or pro-forma basis on a Duke Energy Florida monthly earnings surveillance report, Duke Energy Florida may petition the FPSC to amend its base rates during the term of the agreement.
In addition to the refunds related to Crystal River Unit 3 mentioned above, Duke Energy Florida is refunding $288 million to retail customers through its fuel clause.
Pursuant to the 2013 Settlement Agreement, Duke Energy Florida will maintain base rates at the current level through the last billing period of 2018, subject to the return on equity range of 9.5 percent to 11.5 percent. Duke Energy Florida will not be required to file a depreciation study, fossil dismantlement study or nuclear decommissioning study until the earlier of the next rate case filing or March 31, 2019.
If Duke Energy Florida determines that additional amounts are necessary to fund the Crystal River Unit 3 decommissioning trust, it is permitted to petition for collection of those funds up to $8 million through a base rate surcharge. If the FPSC approves annual decommissioning funding prior to the end of 2018 in excess of the amount authorized for recovery in the base rate surcharge, the excess shall be deferred with a carrying costs and recovered through the Capacity Cost Recovery Clause beginning in January 2019, without having to file a general rate case.
Levy Nuclear Station
On July 28, 2008, Duke Energy Florida filed its COL application with the NRC for two Westinghouse AP1000 reactors at Levy, which the NRC has docketed for review. Various parties filed a joint petition to intervene in the Levy COL application. On March 26, 2013, the Atomic Safety and Licensing Board issued a decision finding that the NRC had carried its burden of demonstrating that its Final Environmental Impact Statement complies with the National Environmental Policy Act and applicable NRC regulatory requirements. A mandatory hearing conducted by the five NRC Commissioners is expected to occur in January 2015.
In 2008, the FPSC granted Duke Energy Florida’s petition for an affirmative Determination of Need and related orders requesting cost recovery under Florida’s nuclear cost-recovery rule for Levy, together with the associated facilities, including transmission lines and substation facilities.
Under the terms of the 2012 Settlement, Duke Energy Florida began retail cost-recovery of Levy costs effective in the first billing cycle of January 2013 at the fixed rates contained in the settlement and continuing for a five-year period, with true-up of any actual costs not recovered during the 5-year period occurring in the final year. This amount is intended to recover the estimated retail project costs to date plus costs
44
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
necessary to obtain the COL and any engineering, procurement and construction (EPC) agreement cancellation costs, should Duke Energy Florida ultimately choose to cancel that contract. The consumer parties will not oppose Duke Energy Florida continuing to pursue a COL for Levy. The 2012 Settlement provided that Duke Energy provideFlorida will treat the allocated wholesale cost of Levy as a retail regulatory asset and include this asset as a component of rate base and amortization expense for regulatory reporting. Duke Energy Florida had the discretion, under certain documentscircumstances, to accelerate and/or suspend such amortization in full or in part provided that it amortizes all of the regulatory asset by December 31, 2016.
Pursuant to the 2013 Settlement, Duke Energy Florida agrees to terminate the EPC at the earliest reasonable and prudent time. The EPC was based on receiving the COL by January 1, 2014, which will not occur as noted above. The 2013 Settlement provides for recovery of the EPC cancellation costs from customers. Duke Energy Florida will exercise best efforts to obtain the COL from the NRC prior to March 31, 2015. If Duke Energy Florida, at its own discretion, decides not to pursue the COL prior to March 31, 2015, it agrees to credit customers $10 million as a reduction to fuel costs.
Cost recovery shall terminate upon the earlier of (i) full recovery of Levy costs or (ii) the first billing cycle of January 2018, subject to a final true-up through the nuclear cost recovery clause.
In accordance with the 2013 Settlement, Duke Energy Florida will cease amortization of the wholesale allocation of Levy investments against retail rates. In the second quarter of 2013, Duke Energy Florida recorded a pretax charge of $65 million to write-off the wholesale portion of Levy investments. This amount is included in Impairment charges on Duke Energy Florida’s Condensed Statements of Operations and Comprehensive Income.
The 2013 Settlement allows for full recovery of the remaining retail project costs within five years from 2013 through 2017. Duke Energy Florida has an ongoing responsibility to demonstrate prudency related to the issuewind down of the Levy investment and the potential for its review.salvage of Levy assets. As of June 30, 2013, Duke Energy also received an Investigative Demand issued by the NCDOJ on July 6, 2012, requesting the productionFlorida has a net uncollected investment in Levy of certain documentsapproximately $281 million, including AFUDC. Of this amount, $143 million is included in Regulatory assets and $138 million, related to land and the issues which are alsoCOL, is included in Net, property, plant and equipment on Duke Energy Florida’s Condensed Balance Sheets.
Crystal River 1 and 2 Coal Units
Pursuant to the subject2013 Settlement, in the event Duke Energy Florida decides to retire the Crystal River 1 and 2 coal units in order to comply with certain environmental regulations, it will be allowed to continue to recover existing annual depreciation expense through the end of 2020. Beginning in 2021, Duke Energy Florida will be allowed to recover any remaining net book value of the NCUC Investigation. assets from retail customers through the Capacity Cost Recovery Clause.
New Generation
Duke Energy’s responsesEnergy Florida currently projects a significant need for additional generation to offset the impact of the lost capacity resulting from the retirement of Crystal River Unit 3 as well as the possible retirement of the Crystal River 1 and 2 coal units. The 2013 Settlement establishes a recovery mechanism for additional generation needs. This recovery mechanism, the Generation Base Rate Adjustment (GBRA), will apply to (i) the construction, uprate of existing generation, and/or purchase of up to 1,150 MW of combustion turbine and/or combined cycle generating capacity prior to the end of 2017 and (ii) the construction of additional generation of up to 1,800 MW to be placed in service in 2018 upon FPSC approval of a need determination. Duke Energy Florida will be permitted to recover the prudent costs of these requests were submitteditems through an increase in base rates, upon the in-service date of such assets, without a general rate case at a 10.5 percent return on August 7,equity.
Cost of Removal Reserve
The 2012 Settlement and 2013 Settlement provide Duke Energy Florida the discretion to reduce cost of removal amortization expense by up to the balance in the cost of removal reserve until the earlier of (a) its applicable cost of removal reserve reaches zero; (b) the expiration of the 2012 Settlement, unless replaced; or (c) the expiration of the 2013 Settlement, if approved. Duke Energy Florida may not reduce amortization expense if the reduction would cause it to exceed the appropriate high point of the return on equity range. Duke Energy Florida recognized a reduction in amortization expense of $17 million for the three months ended June 30, 2013, and $73 million and $58 million for the six months ended June 30, 2013 and 2012, respectively. Duke Energy Florida recognized no reduction of amortization expense for the three months ended June 30, 2012. Duke Energy Florida had eligible cost of removal reserves of $41 million remaining at June 30, 2013, which is unable to predict the ultimate outcome of these proceedings.
Refer to Note 5 for information regarding Progress Energy merger shareholder litigation.impacted by accruals in accordance with its latest depreciation study, removal costs expended, jurisdictional allocation changes and reductions in amortization expense.
Duke Energy Ohio and
Capacity Rider Filing
On August 29, 2012, Duke Energy Kentucky Ohio filed an application with the PUCO for the establishment of a charge, pursuant to Ohio’s state compensation mechanism, for capacity provided consistent with its obligations as a Fixed Resource Requirement (FRR) entity for approximately $729 million. The application included a request for deferral authority and for a new tariff to implement the charge. The deferral being sought is the difference between Duke Energy Ohio’s embedded costs and market-based prices for capacity. The requested tariff would implement a charge to be collected via a rider through which such deferred balances will subsequently be recovered. Hearings concluded in May 2013. Under the current procedural schedule, Duke Energy Ohio expects an order in the second half of 2013.
2012 Electric Rate Case
On May 1, 2013, the PUCO approved a settlement agreement (Electric Settlement) between Duke Energy Ohio and all intervening parties in connection with an electric distribution case, filed in July 2012. The Electric Settlement provides for a net increase in electric distribution
45
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
revenues of $49 million, or an average increase of 2.9 percent, based upon a return on equity of 9.84 percent. Revised rates were effective in May 2013.
2012 Natural Gas Rate Case
On April 2, 2013, Duke Energy Ohio reached a stipulation (Gas Settlement) with the PUCO Staff and intervening parties in connection with a gas distribution case, filed in July 2012. The Gas Settlement provides for no increase in base rates for gas distribution service. The Gas Settlement left unresolved the recovery of environmental remediation costs associated with former manufactured gas plants (MGP). The Gas Settlement is based upon a return on equity of 9.84 percent.
Duke Energy Ohio’s original application requested that MGP remediation costs be recovered through base rates; however, the Gas Settlement establishes a rider for recovery of allowable costs subject to the result of additional litigation. Duke Energy Ohio has requested recovery of approximately $63 million for MGP remediation costs deferred, including carrying costs, through December 31, 2012. Hearings for the MGP litigation were completed in May 2013.
Duke Energy Ohio expects revised base rates, if approved, to go into effect in the second half of 2013. Upon receipt of the PUCO’s order, Duke Energy Ohio will file an application to establish the MGP Rider based on the amount approved by the PUCO.
Regional Transmission Organization Realignment. Realignment
Duke Energy Ohio, which includes its wholly owned subsidiary Duke Energy Kentucky, transferred control of its transmission assets to effect a Regional Transmission Organization (RTO) realignment from MISOMidcontinent Independent System Operator, Inc. (MISO) to PJM Interconnection, LLC (PJM), effective December 31, 2011.
On December 16, 2010, the FERC issued an order related to MISO’s cost allocation methodology surrounding Multi-Value Projects (MVP), a type of MISO Transmission Expansion Planning (MTEP) project cost. MISO expects that MVP will fund the costs of large transmission projects designed to bring renewable generation from the upper Midwest to load centers in the eastern portion of the MISO footprint. MISO approved MVP proposals with estimated capital project costs of approximately $5.2$5.5 billion prior to the date of Duke Energy Ohio’s exit from MISO on December 31, 2011. These projects are expected to be undertaken by the constructing transmission owners from 2012 through 2020 with costs, including an authorized rate of return and associated operating and maintenance expenses, recovered through MISO over the useful life of the projects. The FERC order did not clearly and expressly approve MISO’s apparent interpretation that a withdrawing transmission owner is obligated to pay its share of costs of all MVP projects approved by MISO up to the date of the withdrawing transmission owners’ exit from MISO. Duke Energy Ohio including Duke Energy Kentucky, has historically represented approximately five-percentfive percent of the MISO system. The impact of this order is not fully known, but could result in a substantial increase inIn 2011, MISO transmission expansion costs allocated toestimated Duke Energy Ohio and Duke Energy Kentucky subsequentOhio’s MVP obligation to a withdrawal from MISO. Duke Energy Ohio and Duke Energy Kentucky, among other parties, sought rehearingbe $514 million based on the future revenue requirements of the FERCproposed MVP order.projects and using an 8.2% discount rate. This estimate could change significantly and is dependent in large part on which projects are actually constructed, the final costs to complete and operate the projects and the discount rate used to measure the liability, if the liability can be discounted when recorded. On October 21, 2011, the FERC issued an order on rehearing in this matter largely affirming its original MVP order and conditionally accepting MISO’s compliance filing as well as determining that the MVP allocation methodology is consistent with cost causation principles and FERC precedent. The FERC also reiterated that it will not prejudge any settlement agreement between an RTO and a withdrawing transmission owner for fees that a withdrawing transmission owner owes to the RTO. The order further states that any such fees that a withdrawing transmission owner owes to an RTO are a matter for those parties to negotiate, subject to review by the FERC. The FERC also ruled that Duke Energy Ohio and Duke Energy Kentucky’s challenge of MISO’s ability to allocate MVP costs to a withdrawing transmission owner is beyond the scope of the proceeding. The order further stated that MISO’s tariff withdrawal language establishes that once cost responsibility for transmission upgrades is determined, withdrawing transmission owners retain any costs incurred prior to the withdrawal date. In order to preserve theirits rights, Duke Energy Ohio and Duke Energy Kentucky filed an appeal of the FERC order in the D.C. Circuit Court of Appeals. The case was consolidated with appeals of the FERC order by other parties in the Seventh Circuit Court of Appeals. On June 7, 2013, the Seventh Circuit dismissed Duke Energy Ohio’s appeal for lack of a final administrative decision on the matter.
On December 29, 2011, MISO filed with FERC a Schedule 39 to MISO’s tariff. Schedule 39 provides for the allocation of MVP costs to a withdrawing owner based on the owner’s actual transmission load after the owner’s withdrawal from MISO, or, if the owner fails to report such load, based on the owner’s historical usage in MISO assuming annual load growth. On January 19, 2012, Duke Energy Ohio filed with FERC a protest of the allocation of MVP costs to them under Schedule 39. On February 27, 2012, the FERC accepted Schedule 39 as a just and reasonable basis for MISO to charge for MVP costs, a transmission owner that withdraws from MISO after January 1, 2012. The FERC set for hearing whether MISO’s proposal to use the methodology in Schedule 39 to calculate the obligation of transmission owners who withdrew from MISO prior to January 1, 2012 (such as Duke Energy Kentucky have entered into settlements or have received state regulatory approvals associatedOhio) to pay for MVP costs is consistent with the RTO realignment. MVP-related withdrawal obligations in the tariff at the time that they withdrew from MISO, and, if not, what amount of, and methodology for calculating, any MVP cost responsibility should be.
On March 28, 2012, Duke Energy Ohio filed a request for rehearing of FERC’s February 27, 2012 order on MISO’s Schedule 39. The Schedule 39 hearing was held in April 2013. A FERC Administrative Law Judge (ALJ) presided over the hearing and issued an initial decision on July 16, 2013. The ALJ ruled that Schedule 39 is consistent with the MVP-related withdrawal obligations in the tariff at the time that Duke Energy Ohio withdrew from MISO and is otherwise just and reasonable. Thus, under the initial decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio will file exceptions to the initial decision, requesting the FERC overturn the ALJ’s decision. After reviewing the initial decision, along with all exceptions and responses to exceptions filed by the parties, the FERC will issue a final decision. Duke Energy Ohio fully intends to appeal to the federal court of appeals if the FERC affirms the ALJ’s decision.
On December 22, 2010, the KPSC issued an order granting approval of Duke Energy Kentucky’s request to effect the RTO realignment, subject to several conditions. The conditions accepted by Duke Energy Kentucky include a commitment to not seek to double-recover in a future rate case the transmission expansion fees that may be charged by the MISO and PJM in the same period or overlapping periods. On January 25, 2011, the KPSC issued an order stating that the order had been satisfied and is now unconditional.
On April 26, 2011, Duke Energy Ohio, Ohio Energy Group, The Office of Ohio Consumers’ Counsel and the Commission Staff filed an Application and a Stipulation with the PUCO regarding Duke Energy Ohio’s recovery via a non-bypassable rider of certain costs related to its proposed RTO realignment. Under the Stipulation, Duke Energy Ohio would recover all MTEP costs, including but not limited to MVP costs, directly or indirectly charged to Duke Energy Ohio retail customers. Duke Energy Ohio would not seek to recover any portion of the MISO exit obligation, PJM integration fees, or internal costs associated with the RTO realignment and the first $121 million of PJM transmission
46
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
expansion costs from Ohio retail customers. Duke Energy Ohio also agreed to vigorously defend against any charges for MVP projects from MISO. On May 25, 2011, the Stipulation was approved by the PUCO. An application for rehearing filed by Ohio Partners for Affordable Energy was denied by the PUCO on July 15, 2011.
On October 14, 2011, Duke Energy Ohio and Duke Energy Kentucky filed an application with the FERC to establish new wholesale customer rates for transmission service under PJM’s Open Access Transmission Tariff. In this filing, Duke Energy Ohio and Duke Energy Kentucky sought recovery of their legacy MTEP costs, including MVP costs, and submitted an analysis showing that the benefits of the RTO realignment outweigh the costs to the customers. The new rates went into effect, subject to refund, on January 1, 2012. Protests were filed by certain transmission customers. On April 24, 2012, FERC issued an order in which it, among other things, denied recovery of legacy MTEP costs without prejudice to the right of Duke Energy Ohio and Duke Energy Kentucky to make another filing including a more comprehensive cost-benefit analysis to support such recovery. Settlement discussions are underway with the relevant intervening parties that address matters raised in the initial October 14, 2011 filing.
On November 2, 2011, MISO, the MISO Transmission Owners, Duke Energy Ohio and Duke Energy Kentucky jointly submitted to the FERC a filing that addresses the treatment of MTEP costs, excluding MVP costs. The November 2, 2011 filing, which was accepted by the FERC on December 30, 2011, provides that the MISO Transmission Owners will continue to be obligated to construct the non-MVP MTEP projects, for which Duke Energy Ohio and Duke Energy Kentucky will continue to be obligated to pay a portion of the costs. Likewise, transmission customers serving load in MISO will continue to be obligated to pay a portion of the costs of a previously identified non-MVP MTEP project that Duke Energy Ohio has constructed.
On December 29, 2011, MISO filed with FERC a Schedule 39 to MISO’s tariff. Schedule 39 provides for the allocation of MVP costs to a withdrawing owner based on the owner’s actual transmission load after the owner’s withdrawalUpon its exit from MISO or, if the owner fails to report such load, based on the owner’s historical usage in MISO assuming annual load growth. On January 19, 2012, Duke Energy Ohio and Duke Energy Kentucky filed with FERC a protest of the allocation of MVP costs to them under Schedule 39. On February 27, 2012, the FERC accepted Schedule 39 as a just and reasonable basis for MISO to charge for MVP costs, a transmission owner that withdraws from MISO after January 1, 2012. The FERC set for hearing whether MISO’s proposal to use the methodology in Schedule 39 to calculate the obligation of transmission owners who withdrew from MISO prior to January 1, 2012 (such as Duke Energy Ohio and Duke Energy Kentucky) to pay for MVP costs is consistent with the MVP-related withdrawal obligations in the tariff at the time that they withdrew from MISO, and, if not, what amount of, and methodology for calculating, any MVP cost responsibility should be. On March 28, 2012, Duke Energy Ohio and Duke Energy Kentucky filed a request for rehearing of FERC’s order on MISO’s Schedule 39. This hearing is expected to be scheduled for the first quarter of 2013.
On December 31, 2011, Duke Energy Ohio recorded a liability for its MISO exit obligation and share of MTEP costs, excluding MVP, of approximately $110 million. This liabilitywhich was recorded within Other in Current liabilities and Other in Deferred credits and other liabilities on Duke Energy
36
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
Ohio’s Condensed Consolidated Balance Sheets upon exit from MISO on December 31, 2011. Approximately $74 million of this amount was recorded as a regulatory asset while $36 million was recorded to Operation, maintenance and other in Duke Energy Ohio’s Condensed Consolidated Statements of Operations and Comprehensive Income.Sheets. In addition to the above amounts,these liabilities, Duke Energy Ohio may also be responsible for costs associated with MISO MVP projects. Duke Energy Ohio is contesting its obligation to pay for such costs. However, depending on the final outcome of this matter, Duke Energy Ohio could incur material costs associated with MVP projects, which are not reasonably estimable at this time. Regulatory accounting treatment will be pursued for any costs incurred in connection with
Duke Energy Ohio cannot predict the resolutionoutcome of this matter.these proceedings.
The following table provides a reconciliation of the beginning and ending balance of Duke Energy Ohio’s recorded obligations related to its withdrawal from MISO:
MISO.
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| Balance at |
| Provision / |
| Cash |
| Balance at |
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(in millions) | (in millions) |
| December 31, 2011 |
| Adjustments |
| Reductions |
| June 30, 2012 | (in millions) | Balance at December 31, 2012 |
| Provision / Adjustments |
| Cash Reductions |
| Balance at June 30, 2013(a) | ||||||||||||||||||||||||
Duke Energy Ohio | Duke Energy Ohio |
| $ | 110 |
| $ | 2 |
| $ | (15) |
| $ | 97 | Duke Energy Ohio | $ | 97 |
| $ | 2 |
| $ | (2) |
| $ | 97 | ||||||||||||||||
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(a) | (a) | As of June 30, 2013, $70 million is recorded as a Regulatory asset on Duke Energy Ohio's Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||
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Duke Energy Indiana Phase 2
Edwardsport IGCC Plant
On November 20, 2007, the IURC issued an order granting Duke Energy Indiana a Certificate of Public Convenience and Necessity (CPCN) for the construction of a 618 MW IGCC power plant at Duke Energy Indiana’s Edwardsport Generating Station in Knox County, Indiana with a cost estimate of $1.985 billion assuming timely recovery of financing costs related to the project. On January 25, 2008, Duke Energy Indiana received the final air permit from the Indiana Department of Environmental Compliance Proceeding. Management. The Citizens Action Coalition of Indiana, Inc. (CAC), Sierra Club, Inc. (Sierra Club), Save the Valley, Inc. (Save the Valley), and Valley Watch, Inc. (Valley Watch), all intervenors in the CPCN proceeding (collectively, the Joint Intervenors), have appealed the air permit.
Duke Energy Indiana experienced design modifications, quantity increases and scope growth above what was anticipated from the preliminary engineering design, which increased capital costs for the project. In January 2009, a new cost estimate was approved by the IURC for $2.35 billion (including $125 million of AFUDC). In April 2010, Duke Energy Indiana filed a revised cost estimate for the IGCC project requesting approval of the revised cost estimate of $2.88 billion (including $160 million of AFUDC). In June 2011, Duke Energy Indiana updated its cost forecast to $2.82 billion (excluding AFUDC). In October 2011, Duke Energy Indiana revised its project cost estimate to $2.98 billion (excluding AFUDC). In October 2012, Duke Energy Indiana further revised its projected cost estimate to $3.15 billion (excluding AFUDC).
On December 27, 2012, the IURC approved a settlement agreement finalized in April 2012, between Duke Energy Indiana, the Office of Utility Consumer Counselor (OUCC), the Duke Energy Indiana Industrial Group and Nucor Steel-Indiana, on the cost increase for the construction of the project including subdockets before the IURC related to the project. This settlement agreement resolved all then pending regulatory issues related to the project. The settlement agreement, as approved, caps costs to be reflected in customer rates at $2.595 billion, including estimated AFUDC through June 28,30, 2012. Duke Energy Indiana is allowed to recover AFUDC after June 30, 2012, until customer rates are revised, with such recovery decreasing to 85 percent on AFUDC accrued after November 30, 2012. Duke Energy Indiana also agreed not to request a retail electric base rate increase prior to March 2013, with rates in effect no earlier than April 1, 2014.
The IURC modified the settlement agreement as previously agreed to by the parties to (i) require Duke Energy Indiana to credit customers for cost control incentive payments which the IURC found to be unwarranted as a result of delays that arose from project cost overruns and (ii) provide that if Duke Energy Indiana should recover more than the project costs absorbed by Duke Energy’s shareholders through litigation, any surplus must be returned to the Duke Energy Indiana’s ratepayers. On December 11, 2012, Duke Energy Indiana filed an arbitration action against General Electric Company and Bechtel Corporation in connection with their work at the Edwardsport IGCC facility. Duke Energy Indiana is seeking damages of not less than $560 million. Duke Energy Indiana cannot predict the outcome of this matter.
Over the course of construction of the project, Duke Energy Indiana recorded pre-tax charges of approximately $897 million, related to the Edwardsport project including the settlement agreement discussed above. Of this amount, pre-tax impairment and other charges of $420 million were recorded during the six months ended June 30, 2012. These charges were recorded in Impairment charges and Operations, maintenance and other on Duke Energy’s Condensed Consolidated Statements of Operations and Duke Energy Indiana’s Condensed Consolidated Statements of Operations and Comprehensive Income.
The Joint Intervenors have appealed the IURC order approving the April 2012 settlement agreement and other related regulatory orders to the Indiana Court of Appeals. The Appellants’ brief is due September 9, 2013, and a final decision is anticipated mid-2014.
The project was placed in commercial operation in June 2013.
The costs for the Edwardsport IGCC plant are recovered from retail electric customers via a tracking mechanism, the IGCC Rider. Duke Energy Indiana files information related to the IGCC Rider every six months. The tenth semi-annual IGCC rider proceeding is currently pending, and testimony was filed for the eleventh semi-annual IGCC rider proceeding in July 2013. In both proceedings, Duke Energy Indiana has requested recovery associated with the capped construction costs of the project and forecasted operating expenses for the period the plant is in service.
47
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Phase 2 Environmental Compliance Proceeding
On April 10, 2013, the IURC aapproved Duke Energy Indiana’s filed plan for the addition of certain environmental pollution control projects on several of its coal-fired generating units in order to comply with existing and proposed environmental rules and regulations. The expenditures approved in the plan will be presented for recovery in Duke Energy Indiana’s semi-annual environmental cost recovery rider. The plan calls for a combination of selective catalytic reduction systems, dry sorbent injection systems for SO3 mitigation, activated carbon injection systems and/or mercury re-emission chemical injection systems. The capital costs are estimated at $450$395 million (excluding AFUDC). Duke Energy Indiana also indicated that it preliminarily anticipates the retirement of Wabash River Units 2 through 5 in 2015 and is still evaluating future equipment additions or retirement of Wabash River Unit 6. A procedural schedule
OTHER REGULATORY MATTERS
Progress Energy Merger FERC Mitigation
On June 8, 2012, the FERC conditionally approved the merger with Progress Energy, including Duke Energy and Progress Energy’s revised market power mitigation plan, the Joint Dispatch Agreement (JDA) and the joint Open Access Transmission Tariff (OATT). The revised market power mitigation plan provides for the IURC proceeding has not been established.acceleration of one transmission project and the construction of seven other transmission projects (Long-term FERC Mitigation) and interim firm power sale agreements during the construction of the transmission projects (Interim FERC Mitigation). The Long-term FERC Mitigation is expected to increase power imported into the Duke Energy Carolinas and Duke Energy Progress service areas and enhance competitive power supply options in the service areas. The construction of these projects will occur over the next two to three years.
On June 25, 2012, Duke Energy and Progress Energy accepted the conditions imposed by the FERC.
On July 10, 2012, certain intervenors requested a rehearing seeking to overturn the June 8, 2012 order by the FERC. On August 8, 2012, FERC granted rehearing for further consideration.
Following the closing of the merger, Duke Energy’s outside counsel reviewed Duke Energy’s mitigation plan and discovered a technical error in the calculations. Duke Energy reported the error to the appropriate regulatory bodies and is working to determine whether additional mitigation measures are necessary. Duke Energy cannot predict the outcome of this matter.
Planned and Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10-20 years), and options being considered to meet those needs. The IRP’s filed by the Subsidiary Registrants in 2013, 2012 and 2011 included planning assumptions to potentially retire by 2015, certain coal-fired generating facilities in North Carolina, South Carolina, Florida, Indiana and Ohio that do not have the requisite emission control equipment, primarily to meet Environmental Protection Agency (EPA) regulations that are not yet effective.
The table below contains the net carrying value of generating facilities planned for early retirement or being evaluated for potential retirement included in Property, plant and equipment, net on the Condensed Consolidated Balance Sheets. In addition to the amounts presented below, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Indiana Carbon Sequestration. Duke Energy Indiana filed a petition with the IURC requesting approvalhave $73 million, $190 million and $59 million, respectively, of its plans for studying carbon storage, sequestration and/or enhanced oil recovery for the carbon dioxide (CO2) from the Edwardsport IGCC facilitynet carrying value related to previously retired coal generation facilities included in Regulatory assets on March 6, 2009. On July 7, 2009, Duke Energy Indiana filed its case-in-chief testimony requesting approval for cost recovery of a $121 million site assessment and characterization plan for CO2 sequestration options including deep saline sequestration, depleted oil and gas sequestration and enhanced oil recovery for the CO2 from the Edwardsport IGCC facility. The OUCC filed testimony supportive of the continuing study of carbon storage, but recommended that Duke Energy Indiana break its plan into phases, recommending approval of only $33 million in expenditures at this time and deferral of expenditures rather than cost recovery through a tracking mechanism as proposed by Duke Energy Indiana. The CAC, an intervenor, recommended against approval of the carbon storage plan stating customers should not be required to pay for research and development costs. Duke Energy Indiana’s rebuttal testimony was filed October 30, 2009, wherein it amended its request to seek deferral of $42 million to cover the carbon storage site assessment and characterization activities scheduled to occur through the end of 2010, with further required study expenditures subject to future IURC proceedings. An evidentiary hearing was held on November 9, 2009.their Condensed Consolidated Balance Sheets.
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| Duke Energy Progress | (c)(e) |
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| Duke Energy Indiana | (g) | ||||||||||||||||||||||||||||||||||||||
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Remaining net book value (in millions)(a) | $ | 326 |
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(a) | Included in Property, plant and equipment, net as of June 30, 2013, on the Condensed Consolidated Balance Sheets, unless otherwise noted. | |||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Includes Lee Units 1 and 2. Excludes 170 MW Lee Unit 3 that is expected to be converted to gas in 2014. | |||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | Includes Sutton Station, which is expected to be retired by the end of 2013. | |||||||||||||||||||||||||||||||||||||||||||||||||||
(d) | Includes Crystal River Units 1 and 2. | |||||||||||||||||||||||||||||||||||||||||||||||||||
(e) | Remaining net book value of Duke Energy Progress' Sutton Station is included in Generation facilities to be retired, net, on the Condensed Consolidated Balance Sheets at June 30, 2013. | |||||||||||||||||||||||||||||||||||||||||||||||||||
(f) | Includes Beckjord Station Units 2 through 6 and Miami Fort Unit 6. Beckjord has no remaining book value. | |||||||||||||||||||||||||||||||||||||||||||||||||||
(g) | Includes Wabash River Units 2 through 6. Wabash River Unit 6 is being evaluated for potential conversion to gas. | |||||||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives, and plans to seek regulatory recovery for amounts that would not be otherwise recovered when any of these assets are retired. However, such recovery, including recovery of carrying costs on remaining book values, could be subject to future regulatory approvals and therefore cannot be assured. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
48
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
5. Commitments and Contingencies COMMITMENTS AND CONTINGENCIES
Environmental.ENVIRONMENTAL
Duke Energy is subject to international, federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. Duke Energy Carolinas, Duke Energy Ohio and Duke Energy IndianaThe Subsidiary 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, imposing new obligations on the Duke Energy Registrants.
The following environmental matters impact all of the Duke Energy Registrants.
Remediation Activities. Activities
The Duke Energy Registrants are responsible for environmental remediation at various contaminated sites. These include some properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. In some cases, the Duke Energy Registrants no longer ownsown the property. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, activities vary with site conditions and locations, remediation requirements, complexity and sharing of responsibility. If remediation activities involve statutory joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for contamination caused by other parties. In some instances, the Duke Energy Registrants may share liability associated with contamination with other potentially responsible parties, and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Reserves associated with remediation activities at certain sites have been recorded and it is anticipated that additional costs associated with remediation activities at certain sites will be incurred in the future. All of these sites generally are managed in the normal courseas part of business or affiliate operations. The Duke Energy Registrants continually assess the nature and extent of known or potential environmentally related contingencies and record liabilities when losses become probable and are reasonably estimable. The Duke Energy Registrants have accrued costs associated with remediation activities at some of itstheir current and former sites for the stages of investigation, remediation and monitoring that can be reasonably estimated, as well as other relevant environmental contingent liabilities. Management,At this time, the Duke Energy Registrants cannot estimate the total costs that may be incurred in connection with the remediation of all stages of all sites because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives, and/or regulatory decisions have not yet been determined. It is anticipated that additional costs, which could be material, associated with remediation activities at certain sites will be incurred in the normal course of business, continually assesses the nature and extent of known or potential environmentally related contingencies and records liabilities when losses become probable and are reasonably estimable.future. Costs associated with remediation activities within the Duke Energy Registrants’ operations are typically expensed as operation, maintenance and other expense unless regulatory recovery of the costs is deemed probable.
As of June 30, 2012,The following table contains information regarding reserves for probable and estimable costs related to the Duke Energy Ohio had a total reserve of $22 million, related to remediation work at certain former manufactured gas plant (MGP)Registrants’ various environmental sites. These amounts are recorded in Other within Deferred Credits and Other Liabilities on the Duke Energy Registrants’ Condensed Consolidated Balance Sheets.
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(in millions) | Duke Energy |
| Duke Energy Carolinas |
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| Duke Energy Progress |
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| Duke Energy Indiana | ||||||||||||||||
Balance at December 31, 2011 | $ | 61 |
| $ | 12 |
| $ | 23 |
| $ | 11 |
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Balance at June 30, 2012 | $ | 54 |
| $ | 13 |
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Balance at December 31, 2012 | $ | 75 |
| $ | 12 |
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Balance at June 30, 2013 | $ | 67 |
| $ | 12 |
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Duke Energy Ohio has received an order from the PUCO to defer the costs incurred. As of June 30, 2012, Duke Energy Ohio has incurred for probable and deferred $75 million ofestimable costs related to environmental sites. Recovery of those costs is being sought in Duke Energy Ohio’s natural gas distribution rate case as discussed in Note 4.
The additional losses in excess of recorded reserves that the MGP sites. The PUCO will rule onDuke Energy Registrants’ could incur for the recoverystages of these costs at a future proceeding. Management believes it is probableinvestigation, remediation and monitoring for their environmental sites that additional liabilities will be incurred as work progresses at Ohio MGP sites; however, costs associated with future remediation cannot currentlycan be reasonably estimated.estimated at this time are presented in the table below.
(in millions) | |||||||||
Duke Energy | $ | 57 | |||||||
Duke Energy Carolinas | 29 | ||||||||
Progress Energy | 6 | ||||||||
Duke Energy Progress | 3 | ||||||||
Duke Energy Florida | 3 | ||||||||
Duke Energy Ohio | 17 | ||||||||
Duke Energy Indiana | 5 | ||||||||
Clean Water Act 316(b).
The EPA published its proposed cooling water intake structures rule on April 20, 2011. Duke Energy submitted comments on the proposed rule on August 16, 2011. The proposed rule advances one main approach and three alternatives. The main approach establishes aquatic protection requirements for existing facilities and new on-site facility additions that withdraw 2 million gallons or more of water per day from rivers, streams, lakes, reservoirs, estuaries, oceans, or other U.S. waters for cooling purposes. Based on the main
49
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
approach proposed, most, if not all of the 22 coal, natural gas and nuclear-fueled steam electric generating facilities in which the Duke Energy Registrants are either a whole or partial owner are likely affected sources. Additional sources including some combined-cycle combustion turbine facilities, may also be impacted, at least for intake modifications.unless retired prior to implementation of the 316(b) requirements.
37
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
The EPA recently modified a previous settlement agreement that now calls forIn June 2013, the EPA to finalizeextended the deadline for issuance of the final 316(b) rule by Juneto November 2013. Compliance with portions ofIf the rule is finalized as proposed, initial submittals, station details or study plans would be due in the summer of 2014. If required, modifications to the intakes could beginbe required as early as mid- to-late 2016. Because of the wide range of potential outcomes, including the other three alternative proposals, the Duke Energy Registrants are unable to estimate its costs to comply at this time.predict the outcome of the rulemaking.
Cross-State Air Pollution Rule (CSAPR).
On August 8, 2011, the final Cross-State Air Pollution Rule (CSAPR) was published in the Federal Register. The CSAPR established state-level annual SOsulfur dioxide (SO2) budgets and NOannual seasonal nitrogen oxide (NOx) budgets that were to take effect on January 1, 2012, and state-level ozone-season NOx budgets that were to take effect on May 1, 2012, allocating emission allowances to affected sources in each state equal to the state budget less an allowance set-aside for new sources. The budget levels were set to decline in 2014 for many states, including each state that the Duke Energy Registrants operate in, except for South Carolina where the budget levels were to remain constant. The rule allowed both intrastate and interstate allowance trading.2012.
Numerous petitions for review ofparties challenged the CSAPR and motions for stay ofrule. On August 21, 2012, the CSAPR were filed withD.C. Circuit vacated the United States Court of Appeals for the District of Columbia. On December 30, 2011, theCSAPR. The court ordered a stay of the CSAPR pending the court’s resolution of the various petitions for review. Based on the court’s order,also directed the EPA continues to administercontinue administering the Clean Air Interstate Rule (CAIR) that the Duke Energy Registrants have been complying with since 2009, pending completion of a remand rulemaking to replace CSAPR with a valid rule. The CAIR requires additional reductions in SO2and NOx emissions beginning in 2015. The EPA petitioned for rehearing by the D.C. Circuit, which was denied. On June 24, 2013, the U.S. Supreme Court (Supreme Court) issued an order granting the EPA’s petitions for a writ of certiorari. Oral arguments on the merits of the case will occur on a date to be replacedscheduled by the CSAPR beginning in 2012. Oral arguments inSupreme Court after briefing is completed on October 31, 2013. The Supreme Court is likely to issue its decision on the case were held on April 13, 2012. A decision is expected in the third quarter of 2012.merits by mid-2014.
The stringency of the 2012 and 2014 CSAPR requirements varied among the Duke Energy Registrants. Where the CSAPR requirements were to be constraining, activities to meet the requirements could include purchasing emission allowances, power purchases, curtailing generation and utilizing low sulfur fuel. The CSAPR was not expected to result in Duke Energy Registrants adding new emission controls. Technical adjustments to the CSAPR recently finalized by the EPA will not materially impact the Duke Energy Registrants. The Duke Energy Registrants cannot predict the outcome of the litigation or how it might affectproceedings. The continued implementation of the CSAPR requirements as they apply toCAIR pending the outcome of the rehearing process will not result in the Duke Energy Registrants.Registrants adding new emission controls.
Coal Combustion Product (CCP) Management. Residuals (CCR)Duke Energy currently estimates that it will spend $259 million ($78 million at Duke Energy Carolinas, $63 million at Duke Energy Ohio and $118 million at Duke Energy Indiana) over the period 2012-2016 to install synthetic caps and liners at existing and new CCP landfills and to convert some of its CCP handling systems from wet to dry systems to comply with current regulations. A significant portion of the estimated spending will be capitalized as property, plant and equipment, while certain of the costs are the result of a legal obligation as defined by accounting guidance applicable to asset retirement obligations. The Duke Energy Registrants expect to recover the costs associated with regulated operations through routine regulatory rate proceedings. The EPA and a number of states are considering additional regulatory measures that will contain specific and more detailed requirements for the management and disposal of CCPs, primarily ash, which will also impact the Duke Energy Registrants’ coal-fired power plants.
On June 21, 2010, the EPA issued a proposal to regulate, under the Resource Conservation and Recovery Act, coal combustion residuals (CCR), a term the EPA uses to describe the CCPscoal combustion byproducts associated with the generation of electricity. The EPA proposal contains two regulatory options whereby CCRs not employed in approved beneficial use applications either would either be regulated as hazardous waste or would continue to be regulated as non-hazardous waste. Duke Energy cannot predict the outcome of this rulemaking. However, based on the proposal, the cost of complying with the final regulation will be material. The timing of a final rule is uncertain, but is not expected before sometime in 2013 at the earliest. A lawsuit has been filed in federal court seeking an unspecified legal deadline for the EPA to issue a final rule.
The EPA is opposinghas stated that it may be 2014 before it finalizes the imposition of a legal deadline.
Mercury and Air Toxics Standards (MATS). The final Mercury and Air Toxics Standards rule (previously referred to as the Utility MACT Rule) was published in the Federal Register on February 16, 2012. The final rule establishes emission limits for hazardous air pollutants, including mercury from new and existing coal-fired electric generating units. The rule requires sources to comply with the emission limits by April 16, 2015. Under the Clean Air Act, permitting authorities have the discretion to grant up to a 1-year compliance extension, on a case-by-case basis, to sources that are unable to complete the installation of emission controls before the compliance deadline. The Duke Energy Registrants are evaluating the requirements of the rule and developing strategies for complying with the rule’s requirements. Strategies to achieve compliance with the final MATS rules are likely to include installing new or upgrading existing air emission control equipment, developing monitoring processes and accelerating retirement of some coal-fired electric-generating units. For additional information, refer to Note 4, Regulatory Matters, regarding potential plant retirements.
Numerous petitions for review of the final MATS rule have been filed with the United States Court of Appeals for the District of Columbia. The court has not established a schedule for the litigation.regulation. The Duke Energy Registrants cannot predict the outcome of this rulemaking, but the litigation or how it might affectimpact could be significant.
Steam Electric Effluent Limitation Guidelines
On June 7, 2013, the MATS requirements as they applyproposed Steam Electric Effluent Limitations Guidelines (ELGs) were published in the Federal Register with comments due by September 20, 2013, following a 45-day extension. The EPA is under a court order to complete a final rule by May 22, 2014. The EPA has proposed eight different options for the Duke Energy Registrants.
As finalized,rule, which vary in stringency and cost. The proposal would regulate seven waste streams, including wastewater from air pollution control equipment and ash transport water. The proposed ELG rule is applicable to all steam electric generating units, including most, if not all of the cost tocoal, natural gas and nuclear-fueled generating facilities in which the Duke Energy Registrants have an ownership interest. Compliance is proposed as soon as possible after July 1, 2017, but may extend until July 1, 2022. Duke Energy is still evaluating the proposal. Given the number of options and the long compliance term, Duke Energy is unable to comply withdetermine the regulation willultimate impact of the final rule, but the impact could be material.significant.
EPA Greenhouse Gas New Source Performance Standards (NSPS).
On April 13, 2012, the EPA published in the Federal Register its proposed rule to establish first-time carbon dioxide (CO2) emissions standards for pulverized coal, IGCC, and natural gas combined cycle electric generating units that are permitted and constructed in the future. The proposal wouldwas never finalized. On June 25, 2013, the President of the United States issued a memorandum directing the EPA to issue a new proposal by September 20, 2013, and to issue a final rule in a timely fashion after considering all public comments, as appropriate.
The Presidential memorandum also directs the EPA to propose CO2 emissions guidelines for existing fossil-fueled electric generating units by June 1, 2014 and finalize the guidelines to develop their own regulations for implementing the guidelines. The memorandum directed the EPA to require the states submit their implementation regulations to EPA for approval by June 30, 2016.
Management cannot predict the outcome or the potential impact of these to-be-developed regulations.
Mercury and Air Toxics Standards (MATS)
The final Mercury and Air Toxics Standards rule, previously referred to as the Utility MACT Rule, was published in the Federal Register on February 16, 2012. The final rule establishes emission limits for hazardous air pollutants from new and existing coal-fired and oil-fired steam electric generating units. The rule requires sources to comply with the emission limits by April 16, 2015. Under the Clean Air Act (CAA), permitting authorities have the discretion to grant up to a one-year compliance extension, on a case-by-case basis, to sources that are unable to complete the installation of emission controls before the compliance deadline. The Duke Energy Registrants continue to develop and implement strategies for complying with the rule’s requirements. Strategies to achieve compliance with the final MATS rules will include installing new air emission control equipment, developing monitoring processes, fuel switching and accelerating retirement of some coal-fired electric-generating units. For additional information, refer to Note 4 regarding potential plant retirements.
50
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Numerous petitions for review of the final MATS rule have been filed with the D.C. Circuit. Briefing in the case has been completed. Oral arguments have not been scheduled. The Duke Energy Registrants cannot predict the outcome of the litigation or how it might affect the MATS requirements as they apply to any of the Duke Energy Registrants’ coal (which includes IGCC) and natural gas generation plants that are currently under construction or in operation. Any future pulverized coal and IGCC units will haveRegistrants.
Refer to employ carbon capture and storage (CCS) technologythe table below for a summary of the estimated cost to meetcomply with the CO2 emission standard the EPA has proposed. The proposed standard will not require new natural gas combined cycle facilities to install CCS technology.
Management does not expect any material impact on the Duke Energy Registrants’ future results of operations or cash flows based on the EPA’s proposal. The final rule, however, could be significantly different from the proposal. It is not known when the EPA might finalize the rule.MATS regulations.
Estimated Cost and Impacts of EPA Rulemakings.
While the ultimate compliance requirements for the Duke Energy Registrants for the MATS, Clean Water Act 316(b), CSAPRCCRs and CCRsELGs will not be known until all the rules have been finalized, for planning purposes, the Duke Energy Registrants currently estimate that the cost of new control equipment that may need to be installed on existing power plants to comply with this group of rulesEPA regulations could total $4.5$5 billion to $5$6 billion, excluding AFUDC, over the next 10 years. This range includes estimated costs for new control equipment necessary to comply with the MATS rule, which is the only rule that has been finalized, as shown in the table below.
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Duke Energy | $ | 650 | - | 800 | |||||
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| 65 | - | 85 | |||||
Progress Energy |
| 7 | - | 30 | |||||
Duke Energy Progress |
| 5 | - | 10 | |||||
Duke Energy Florida |
| 2 | - | 20 | |||||
Duke Energy Ohio |
| 40 | - | 85 | |||||
Duke Energy Indiana |
| 540 | - | 600 | |||||
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The Duke Energy Registrants also expect to incur increased fuel, purchased power, operation and maintenance, and other expenses in conjunction with these EPA regulations, and also expect to incur costs for replacement generation for potential coalcoal-fired power plant retirements. Until the final regulatory requirements of the group of EPA regulations are known and can be fully evaluated, the potential compliance costs associated with these EPA regulatory actions are subject to considerable uncertainty. Therefore, the actual compliance costs incurred may be materially different from these estimates based on the timing and requirements of the final EPA regulations.
38
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
The Duke Energy Registrants intend to seek regulatory recovery of amounts incurred associated with regulated operations in complying with these regulations. Refer to Note 4 for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.
Litigation.LITIGATION
Duke Energy
Progress Energy Merger Shareholder Litigation. Litigation
On July 20, 2012, Duke Energy was served with a shareholder Derivative Complaint filed in the Delaware Chancery Court (Rupp v. Rogers, et al)al.). The lawsuit names as defendants JimJames E. Rogers and the ten other members of the Duke Energy board of directors who were also members of the pre-merger Duke Energy board of directors (Legacy Duke Energy Directors). Duke Energy is named as a nominal defendant. Raul v. Rogers, also filed in Delaware Chancery Court was consolidated with the Rupp case on September 24, 2012. Two shareholders filed derivative cases against James E. Rogers and the Legacy Duke Energy Directors. The Gerber v Rogers, et al. lawsuit was filed on December 5, 2012, and the Reilly v. Rogers, et al. lawsuit was filed on January 8, 2013. Each of the lawsuits alleges claims for breach of fiduciary duties of loyalty and care by the defendants in connection with the post-merger change in CEO, as discussed in Note 4.CEO. At a hearing on July 29, 2013, the Chancellor appointed a lead plaintiff and lead counsel for plaintiffs.
On August 3, 2012, Duke Energy was served with a second shareholder Derivative Complaint, which has been transferred to the North Carolina Business Court (Krieger v. Johnson, et al)al.). The lawsuit names as defendants, William D. Johnson, James E. Rogers and the Legacy Duke Energy Directors. Duke Energy is named as a nominal defendant. The lawsuit alleges claims for breach of fiduciary duty in granting excessive compensation to Mr. Johnson. A hearing on the defendants’ motion to dismiss was held on January 22, 2013. A decision on the motion made by Mr. Rogers and the Legacy Duke Energy Directors remains pending.
Duke Energy has been served with two shareholder Derivative Complaints, filed in federal district court in Delaware. The plaintiffs in Tansey v. Rogers, et al., served on August 17, 2012, and Pinchuck v. Rogers, et al., served on October 31, 2012, allege claims for breach of fiduciary duty and waste of corporate assets, as well as claims under Section 14(a) and 20(a) of the Exchange Act against the Legacy Duke Energy Directors. Duke Energy is named as a nominal defendant. On May 17, 2013, the judge granted defendants' motion to stay the litigation until a decision is rendered on the motion to dismiss in the Nieman v. Duke Energy Corporation, et al. case in North Carolina. By order dated May 31, 2013, the court consolidated these two actions and appointed co-lead and liaison counsel for plaintiffs.
Duke Energy was also receivedserved in July 2012 with three purported securities class action lawsuits. The first caseThese three cases (Craig v. Duke Energy Corporation, et al,) was filed on July 24, 2012, in the United States District Court for the Eastern District of North Carolina, Western Division and is brought on behalf of all persons who purchased Duke Energy stock between June 28, 2012 and July 9, 2012. The second case (al.; Nieman v. Duke Energy Corporation, et al) was filed on July 24, 2012,.; and Sunner v. Duke Energy Corporation, et al.), have been consolidated in the United States District Court for the Western District of North CarolinaCarolina. The plaintiff filed a Corrected Consolidated Complaint on behalf ofJanuary 28, 2013, alleging federal Securities Act and Exchange Act claims based on allegedly materially false and misleading representations and omissions made in the Registration Statement filed on July 7, 2011, and subsequently incorporated into other documents, all persons who exchanged shares of Progress Energy common stock for shares of Duke Energy common stock in connection with the merger.post-merger change in CEO. The third case (Sunner v.Corrected Consolidated Complaint names as defendants the Legacy Duke Energy Corporation, et al,) was filedDirectors and certain officers of the company. The claims are purportedly brought on July 30, 2012, in the United States District Court for the Western Districtbehalf of North Carolina on behalfa class of all persons who purchased stock ofor otherwise acquired Duke Energy securities between June 11, 2012 and July 9, 2012 All three of these lawsuits name as defendants2012. The Defendant’s motion to dismiss the Legacy Duke Directors.Consolidated Complaint was filed April 2, 2013. On July 26, 2013, the magistrate judge appointed in the case issued his recommendation that Defendants’ motion to dismiss be denied. The Craig and Nieman cases also name certain officers ofDefendants plan to file objections to the company. recommendation with the District Court, which will make a final decision.
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DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, that Duke Energy might incur in connection with these lawsuits. Additional lawsuits may be filed.
Alaskan Global Warming Lawsuit. Lawsuit
On February 26, 2008, plaintiffs, the governing bodies of an Inupiat village in Alaska, filed suit in the U.S. Federal Court for the Northern District of California against Peabody Coal and various oil and power company defendants, including Duke Energy and certain of its subsidiaries. Plaintiffs brought the action on their own behalf and on behalf of the village’s 400 residents. The lawsuit alleges that defendants’ emissions of CO2 contributed to global warming and constitute a private and public nuisance. Plaintiffs also allege that certain defendants, including Duke Energy, conspired to mislead the public with respect to global warming. The plaintiffs in the case have requested damages in the range of $95 million to $400 million related to the cost of relocating the Village of Kivalina. On June 30, 2008, the defendants filed a motion to dismiss on jurisdictional grounds, together with a motion to dismiss the conspiracy claims. On October 15, 2009, the District Court granted defendantsdefendants’ motion to dismiss. The plaintiffs filed a notice of appeal and the Ninth CircuitU.S. Court of Appeals for the Ninth Circuit held argument in the case on November 28, 2011. Although Duke Energy believesOn September 21, 2012, the likelihoodCourt of loss is remote basedAppeals ruled that the case could not proceed, affirming the District Court’s motion to dismiss. The Plaintiffs have filed a motion for rehearing en banc by the Court of Appeals, which was denied on current case law, it is not possibleNovember 27, 2012. The Plaintiffs’ Petition for Certiorari to predict the ultimate outcome of this matter.Supreme Court was denied, ending the case.
Price Reporting Cases. Cases
A total of five lawsuits were filed against Duke Energy affiliates and other energy companies and remain pending in a consolidated, single federal court proceeding in Nevada.
In November 2009, the judge granted defendants’ motion for reconsideration of the denial of defendants’ summary judgment motion in two of the remaining five cases to which Duke Energy affiliates are a party. A hearing on that motion occurred on July 15, 2011, and on July 19, 2011, the judge granted the motion for summary judgment. Plaintiffs have filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit.
Each of these cases contains similar claims, that the respective plaintiffs, and the classes they claim to represent, were harmed by the defendants’ alleged manipulation of the natural gas markets by various means, including providing false information to natural gas trade publications and entering into unlawful arrangements and agreements in violation of the antitrust laws of the respective states. Plaintiffs seek damages in unspecified amounts.
In November 2009, the judge granted defendants’ motion for reconsideration of the denial of defendants’ summary judgment motion in two of the remaining five cases to which Duke Energy affiliates are a party. A hearing on that motion occurred on July 15, 2011, and on July 19, 2011, the judge granted the motion for summary judgment. The Plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit Court of Appeals), which held argument on October 19, 2012.
On April 10, 2013, the Ninth Circuit Court of Appeals reversed the lower Court’s decision, and returned the case to the same Court for further proceedings.
It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, that Duke Energy might incur in connection with the remaining matters. However, based on Duke Energy’s past experiences with similar cases of this nature, it does not believe its exposure under these remaining matters is material.
Crescent Resources Litigation
On September 3, 2010, the Crescent Resources (Crescent) Litigation Trust filed suit against Duke Energy International Paranapanema Lawsuit. On July 16, 2008,along with various affiliates and several individuals, including current and former employees of Duke Energy, International Geracao Paranapanema S.A. (DEIGP) filed a lawsuit in the Brazilian federal court challenging transmission fee assessments imposed under two new resolutions promulgated byU.S. Bankruptcy Court for the Brazilian Electricity Regulatory Agency (ANEEL) (collectively,Western District of Texas. The case was subsequently transferred to the Resolutions).United States District Court in Austin, Texas. The Resolutions purportCrescent Resources Litigation Trust was established in May 2010 pursuant to impose additional transmission fees (retroactive to July 1, 2004 and effective through June 30, 2009) on generation companies locatedthe plan of reorganization approved in the State of São Paulo for utilization ofCrescent bankruptcy proceedings. The complaint alleges that in 2006 the electric transmission system. The new charges are based upon a flat-fee that failsdefendants caused Crescent to take into account the locational usage by each generator. DEIGP’s additional assessment under these Resolutions amounts toborrow approximately $59 million, inclusive of interest, through June 2012. Based on DEIGP’s continuing refusal to tender payment of the disputed sums, on April 1, 2009, ANEEL imposed an additional fine against DEIGP in the amount of $9 million. DEIGP filed a request to enjoin payment of the fine$1.2 billion and for an expedited decision on the merits or, alternatively, an order requiring that all disputed sums be deposited in the court’s registry in lieu of direct payment to the distribution companies.
On June 30, 2009, the court issued a ruling in which it granted DEIGP’s request for injunction regarding the additional fine, but denied DEIGP’s request for an expedited decision on the original assessment or payment into the court registry. Under the court’s order, DEIGP was required to make installment payments on the original assessment directly to the distribution companies pending resolution on the merits. DEIGP filed an appeal and on August 28, 2009, the order was modified to allow DEIGP to deposit the disputed portion of each installment, which wasimmediately thereafter distribute most of the assessedloan proceeds to Crescent’s parent company without benefit to Crescent. The complaint further alleges that Crescent was rendered insolvent by the transactions, and that the loan proceeds of $1.2 billion as well as Crescent's interest of $252 million and fee payments to the creditor banks of $15 million are subject to recovery by the Crescent bankruptcy estate as an alleged fraudulent transfer. The Plaintiff requests return of the loan proceeds, the payments to the creditor banks and accrued interest from the time of the transfers, as well as other statutory and equitable relief, punitive damages and attorneys’ fees. Duke Energy and its affiliated defendants believe that the referenced 2006 transactions were legitimate and did not violate any state or federal law. The Defendants filed motions to dismiss which were denied. Defendants also filed a (i) motion for partial summary judgment seeking to dismiss Plaintiff's claims for return of interest and fees paid by Crescent to the creditor banks, and (ii) motion to strike Plaintiff's jury demand. The motion to strike the Plaintiff's jury demand was denied. The motion for partial summary judgment was initially denied without prejudice, but later refiled as a motion to dismiss and granted in part with respect to the interest payments and denied with respect to the fee payments.
A mediation, held August 21-22, 2012, was unsuccessful. On January 15, 2013, pursuant to court order, the Plaintiffs tendered a written settlement offer demanding $800 million for a global settlement with all defendants, and alternatively, offering to settle with individually-named defendants for approximately $350 million. Duke Energy and its affiliated defendants tendered a partial settlement offer of $50 million in August 2013. This amount into an escrow account pending resolution on the merits. Inwas recorded as Operation, maintenance and other in Duke Energy’s Condensed Consolidated Statements of Operations during the second quarter of 2009, Duke Energy recorded a pre-tax charge2013. The parties are currently engaged in written discovery and depositions of $33 million associatedboth fact and expert witnesses. Trial has been set to commence in January 2014.
It is not possible to estimate the maximum exposure to loss that may occur in connection with this matter.lawsuit. The ultimate resolution of this matter could have a material effect on the results of operations, cash flows or financial position of Duke Energy.
Brazil Expansion Lawsuit. Lawsuit
On August 9, 2011, the State of São Paulo filed a lawsuit in Brazilian state court against DEIGPDuke Energy International Geracao Paranapenema S.A. (DEIGP) based upon a claim that DEIGP is under a continuing obligation to expand installed generation capacity in the State of São
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DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Paulo by 15%15 percent pursuant to a stock purchase agreement under which DEIGP purchased generation assets from the state. On August 10, 2011, a judge granted an ex parte injunction ordering DEIGP to present a detailed
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DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
expansion plan in satisfaction of the 15%15 percent obligation. DEIGP has previously taken a position that the 15%15 percent expansion obligation is no longer viable given the changes that have occurred in the electric energy sector since privatization of that sector. After filing various objections, defenses and appeals regarding the referenced order, DEIGP submitted its proposed expansion plan on November 11, 2011, but reserved its objections regarding enforceability. The parties will in due course present evidence to the court regarding their respective positions. No trial date has been set.
Crescent Litigation. On September 3, 2010, the Crescent Resources Litigation Trust filed suit against Duke Energy along with various affiliates and several individuals, including current and former employees of Duke Energy, in the U.S. Bankruptcy Court for the Western District of Texas. The Crescent Resources Litigation Trust was established in May 2010 pursuant to the plan of reorganization approved in the Crescent bankruptcy proceedings in the same court. The complaint alleges that in 2006 the defendants caused Crescent to borrow approximately $1.2 billion from a consortium of banks and immediately thereafter distribute most of the loan proceeds to Crescent’s parent company without benefit to Crescent. The complaint further alleges that Crescent was rendered insolvent by the transactions, and that the distribution is subject to recovery by the Crescent bankruptcy estate as an alleged fraudulent transfer. The plaintiff requests return of the funds as well as other statutory and equitable relief, punitive damages and attorneys’ fees. Duke Energy and its affiliated defendants believe that the referenced 2006 transactions were legitimate and did not violate any state or federal law. Defendants filed a motion to dismiss in December 2010. On March 21, 2011, the plaintiff filed a response to the defendant’s motion to dismiss and a motion for leave to file an amended complaint, which was granted. The Defendants filed a second motion to dismiss in response to plaintiffs’ amended complaint.
The plaintiffs filed a demand for a jury trial, a motion to transfer the case to the federal district court, and a motion to consolidate the case with a separate action filed by the plaintiffs against Duke Energy’s legal counsel. On March 22, 2012, the federal District Court issued an order denying the defendant’s motion to dismiss and granting the plaintiffs’ motions for transfer and consolidation. The court has not yet made a final ruling on whether the plaintiffs are entitled to a jury trial. Trial on this matter has been set to commence in January 2014. Duke Energy has agreed to participate in a mediation of this matter, currently scheduled for August 21 and 22, 2012.
It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, that Duke Energyit might incur in connection with this lawsuit.
Federal Advanced Clean Coal Tax Credits. Duke Energy Carolinas has been awarded $125 million of federal advanced clean coal tax credits associated with its construction of Cliffside Unit 6 and Duke Energy Indiana has been awarded $134 million of federal advanced clean coal tax credits associated with its construction of the Edwardsport IGCC plant. In March 2008, two environmental groups, Appalachian Voices and the Canary Coalition, filed suit against the Federal government challenging the tax credits awarded to incentivize certain clean coal projects. Although Duke Energy was not a party to the case, the allegations center on the tax incentives provided for the Cliffside and Edwardsport projects. The initial complaint alleged a failure to comply with the National Environmental Policy Act. The first amended complaint, filed in August 2008, added an Endangered Species Act claim and also sought declaratory and injunctive relief against the DOE and the U.S. Department of the Treasury. In 2008, the District Court dismissed the case. On September 23, 2009, the District Court issued an order granting plaintiffs’ motion to amend their complaint and denying, as moot, the motion for reconsideration. Plaintiffs have filed their second amended complaint. The Federal government has moved to dismiss the second amended complaint; the motion is pending. On July 26, 2010, the District Court denied plaintiffs’ motion for preliminary injunction seeking to halt the issuance of the tax credits.matter.
Duke Energy Carolinas
New Source Review (NSR).
In 1999-2000, the DOJ,U.S. Department of Justice (DOJ), acting on behalf of the EPA and joined by various citizen groups and states, filed a number of complaints and notices of violation against multiple utilities across the country for alleged violations of the NSR provisions of the CAA. Generally, the government alleges that projects performed at various coal-fired units were major modifications, as defined in the CAA, and that the utilities violated the CAA when they undertook those projects without obtaining permits and installing the best available emission controls for SO2, NOx and particulate matter. The complaints seek injunctive relief to require installation of pollution control technology on various generating units that allegedly violated the CAA, and unspecified civil penalties in amounts of up to $32,500$37,500 per day for each violation. A number of Duke Energy Carolinas’ plants have been subject to these allegations. Duke Energy Carolinas asserts that there were no CAA violations because the applicable regulations do not require permitting in cases where the projects undertaken are “routine” or otherwise do not result in a net increase in emissions.
In 2000, the government brought a lawsuit against Duke Energy Carolinas in the U.S. District Court in Greensboro, North Carolina. The EPA claims that 29 projects performed at 25 of Duke Energy Carolinas’ coal-fired units violate these NSR provisions. Three environmental groups have intervened in the case. In August 2003, the trial court issued a summary judgment opinion adopting Duke Energy Carolinas’ legal positions on the standard to be used for measuring an increase in emissions, and granted judgment in favor of Duke Energy Carolinas. The trial court’s decision was appealed and ultimately reversed and remanded for trial by the U.S. Supreme Court. At trial, Duke Energy Carolinas will continue to assert that the projects were routine or not projected to increase emissions. On February 11, 2011, the trial judge held an initial status conference and on March 22, 2011, the judge entered an interim scheduling order. The parties have filed a stipulation in which the United States and Plaintiff-Intervenors have dismissed with prejudice 16 claims. In exchange, Duke Energy Carolinas dismissed certain affirmative defenses. The parties have filed motions for summary judgment on the remaining claims. No trial date has been set, but a trial is not expected until the second half of 2012, at the earliest.set.
It is not possible to estimate the damages, if any, that might be incurred in connection with the unresolved matters related to Duke Energy Carolinas discussed above. Ultimate resolution of these matters could have a material effect on the consolidated results of operations, cash flows or financial position of Duke Energy Carolinas. However, the appropriate regulatory treatment will be pursued for any costs incurred in connection with such resolution.
Asbestos-related Injuries and Damages Claims. Claims
Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement relating to damages for bodily injuries alleged to have arisen from the exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of June 30, 2012,2013, there were 188131 asserted claims for non-malignant cases with the cumulative relief sought of up to $47$32 million, and 5837 asserted claims for malignant cases with the cumulative relief sought of up to $21$10 million. Based on Duke Energy Carolinas’ experience, it is expected that the ultimate resolution of most of these claims likely will be less than the amount claimed.
Amounts recognized as asbestos-related reserves related toon Duke Energy Carolinas in the respective Condensed Consolidated Balance Sheets totaled $776$732 million and $801$751 million as of June 30, 20122013 and December 31, 2011,2012, respectively, and are classified in Other within Deferred Credits and Other Liabilities and Other within Current Liabilities. These reserves are based upon the minimum amount in Duke Energy Carolinas’ best estimate of
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DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
the range of loss for current and future asbestos claims through 2030. Management believes that it is possible there will be additional claims filed against Duke Energy Carolinas after 2030. In light of the uncertainties inherent in a longer-term forecast, management does not believe that they can reasonably estimate the indemnity and medical costs that might be incurred after 2030 related to such potential claims. Asbestos-related loss estimates incorporate anticipated inflation, if applicable, and are recorded on an undiscounted basis. These reserves are based upon current estimates and are subject to greater uncertainty as the projection period lengthens. A significant upward or downward trend in the number of claims filed, the nature of the alleged injury, and the average cost of resolving each such claim could change ourthe estimated liability, as could any substantial or favorable verdict at trial. A federal legislative solution, further state tort reform or structured settlement transactions could also change the estimated liability. Given the uncertainties associated with projecting matters into the future and numerous other factors outside ourits control, management believes that it is possible Duke Energy Carolinas may incur asbestos liabilities in excess of the recorded reserves.
Duke Energy Carolinas has a third-party insurance policy to cover certain losses related to asbestos-related injuries and damages above an aggregate self insuredself-insured retention of $476 million. Duke Energy Carolinas’ cumulative payments began to exceed the self insuranceself-insurance retention on its insurance policy in 2008. Future payments up to the policy limit will be reimbursed by Duke Energy Carolinas’ third party insurance carrier. The insurance policy limit for potential future insurance recoveries for indemnification and medical cost claim payments is $968$935 million in excess of the self insuredself-insured retention. Insurance recoveries of $813$781 million related to this policy are classified in the respective Condensed Consolidated Balance Sheets in Other within Investments and Other Assets and Receivables as of both June 30, 20122013 and December 31, 2011,2012, respectively. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Management believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.
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DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Progress Energy
Synthetic Fuels Matters
In October 2009, a jury delivered a verdict in a lawsuit against Progress Energy and a number of its subsidiaries and affiliates arising out of an Asset Purchase Agreement dated as of October 19, 1999, and amended as of August 23, 2000 (the Asset Purchase Agreement) by and among U.S. Global, LLC (Global); Earthco synthetic fuels facilities (Earthco); certain affiliates of Earthco; EFC Synfuel LLC (which was owned indirectly by Progress Energy) and certain of its affiliates (collectively, the Progress Affiliates). In a case filed in the Circuit Court for Broward County, Florida, in March 2003 (the Florida Global Case), Global requested an unspecified amount of compensatory damages, as well as declaratory relief. Global asserted (i) that pursuant to the Asset Purchase Agreement, it was entitled to an interest in two synthetic fuels facilities previously owned by the Progress Affiliates and an option to purchase additional interests in the two synthetic fuels facilities and (ii) that it was entitled to damages because the Progress Affiliates prohibited it from procuring purchasers for the synthetic fuels facilities. As a result of the 2007 expiration of the Internal Revenue Code Section 29 tax credit program, all of Progress Energy’s synthetic fuels businesses were abandoned and the synthetic fuels businesses were reclassified as discontinued operations.
In November 2009, the court ruled in favor of Global. In December 2009, Progress Energy appealed the Broward County judgment to the Florida Fourth District Court of Appeals. Also, in December 2009, Progress Energy made a $154 million payment, which represented payment of the total judgment, including prejudgment interest, and a required premium equivalent to two years of interest, to the Broward County Clerk of Court bond account. Progress Energy continued to accrue interest related to this judgment.
On October 3, 2012, the Florida Fourth District Court of Appeals reversed the lower court ruling and directed a verdict on damages under a separate Commission and Services Agreement, which was modified by the court’s December 12, 2012 ruling on Global’s motion for reconsideration. The court held that Global was entitled to approximately $90 million of the amount paid into the registry of the court. Progress Energy was entitled to a refund of the remainder of the funds. Progress Energy received and recorded a $63 million pre-tax gain for the refund in December 2012. The gain was recorded in Income from Discontinued Operations, net of tax in the Consolidated Statements of Operations.
The case was remanded to the trial court to determine whether specific performance is an appropriate remedy for the claims under the Asset Purchase Agreement. After a hearing on April 19, 2013, the Court denied Global’s motion for specific performance in light of the parties’ agreement to proceed with the amendment of their respective pleadings. On May 9, 2013, Global filed a Seventh Amended Complaint asserting a single count for breach of the Asset Purchase Agreement and seeking specific performance. A trial is scheduled to commence in January 2014.
In a second suit filed in the Superior Court for Wake County, N.C., Progress Synfuel Holdings, Inc. et al. v. U.S. Global, LLC (the North Carolina Global Case), the Progress Affiliates seek declaratory relief consistent with their interpretation of the Asset Purchase Agreement. In August 2003, the Wake County Superior Court stayed the North Carolina Global Case, pending the outcome of the Florida Global Case. Based upon the verdict in the Florida Global Case, Progress Energy anticipates dismissal of the North Carolina Global Case.
Duke Energy Progress and Duke Energy Florida
Spent Nuclear Fuel Matters
The Nuclear Waste Policy Act of 1982 (as amended) (NWPA) provides the framework for development by the federal government of interim storage and permanent disposal facilities for high-level radioactive waste materials. The U.S. Department of Energy (DOE) is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. Pursuant to the NWPA, Duke Energy Progress and Duke Energy Florida entered into contracts with the DOE under which the DOE agreed to begin taking spent nuclear fuel by no later than January 31, 1998. All similarly situated utilities were required to sign the same Standard Contract for Disposal of Spent Nuclear Fuel. The DOE failed to begin taking spent nuclear fuel by January 31, 1998.
On December 12, 2011, Duke Energy Progress and Duke Energy Florida filed a complaint in the U.S. Court of Federal Claims against the United States, claiming that the DOE breached the standard contract and asserting damages incurred from January 1, 2006 through December 31, 2010. Claims for all periods prior to 2006 have been resolved. Duke Energy Progress and Duke Energy Florida assert damages of $84 million and $21 million, respectively, for the period January 1, 2006 through December 31, 2010. Trial has been set to begin September 23, 2013. Duke Energy Progress and Duke Energy Florida may file subsequent damage claims as they incur additional costs. Duke Energy Progress and Duke Energy Florida cannot predict the outcome of this matter.
Duke Energy Ohio
Antitrust Lawsuit. Lawsuit
In January 2008, four plaintiffs, including individual, industrial and nonprofit customers, filed a lawsuit against Duke Energy Ohio in federal court in the Southern District of Ohio. Plaintiffs alleged that Duke Energy Ohio (then The Cincinnati Gas & Electric Company), conspired to provide inequitable and unfair price advantages for certain large business consumers by entering into non-public option agreements with such consumers in exchange for their withdrawal of challenges to Duke Energy Ohio’s pending Rate Stabilization Plan (RSP), which was implemented in early 2005. On March 31, 2009, the District Court granted Duke Energy Ohio’s motion to dismiss. Plaintiffs filed a motion to alter or set aside the judgment, which was denied by an order dated March 31, 2010. In April 2010, the plaintiffs filed their appeal of that order with the U.S. Court of Appeals for the Sixth Circuit, which heard argument on that appeal on January 11, 2012. On June 4, 2012, the Sixth Circuit Court of Appeals reversed the district court’s decision and remanded the matter on all claims for trial on the merits and on July 25, 2012, the Court denied Duke Energy Ohio’s petition for an en banc review of the case. On October 15, 2012, Duke Energy filed a petition for certiorari to the United States Supreme Court, which was denied on January 14, 2013. Mediations held in December 2012 and March 2013
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DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
were unsuccessful. The plaintiffs’ last mediation demand was for $99 million. It is not possible to predict at this time whether Duke Energy Ohio will incur any liability or to estimate the damages, if any, that Duke Energy Ohio might incurwhich may be incurred in connection with this lawsuit.
Asbestos-related Injuries and Damages Claims. Claims
Duke Energy Ohio has been named as a defendant or co-defendant in lawsuits related to asbestos at its electric generating stations. The impact on Duke Energy Ohio’s consolidated results of operations, cash flows or financial position of these cases to date has not been material. Based on estimates under varying assumptions concerning uncertainties, such as, among others: (i) the number of contractors potentially exposed to asbestos during construction or maintenance of Duke Energy Ohio generating plants; (ii) the possible incidence of various illnesses among exposed workers, and (iii) the potential settlement costs without federal or other legislation that addresses asbestos tort actions, Duke Energy Ohio estimates that the range of reasonably possible exposure in existing and future suits over the foreseeable future is not material. This estimated range of exposure may change as additional settlements occur and claims are made and more case law is established.
Other Litigation and Legal Proceedings.Proceedings
The Duke Energy Registrants are involved in other legal, tax and regulatory proceedings arising in the ordinary course of business, some of which involve substantial amounts. Management believes that the final disposition of these proceedings will not have a material effect on its consolidated results of operations, cash flows or financial position.
The Duke Energy Registrants expense legal costs related to the defense of loss contingencies as incurred.
The Duke Energy Registrants have exposure to certain legal matters that are described herein. The Duke Energy Registrants have recorded reserves for these proceedings and exposures as presented in the table below. These reserves represent management’s best estimate of probable loss as defined in the accounting guidance for contingencies. The amount for Duke Energy includes the reserve related to the Crescent Resources Litigation, which is discussed above. The estimated reasonably possible range of loss for all other non-asbestos related matters in excess of the recorded reserves is not material. Duke Energy Carolinas has insurance coverage for certain of these losses incurred as presented in the table below.
(in millions) | June 30, 2012 |
| December 31, 2011 | |||
Reserves for Legal Matters(a) |
|
|
|
|
| |
Duke Energy(b) | $ | 792 |
| $ | 810 | |
Duke Energy Carolinas(b) |
| 776 |
|
| 801 | |
Duke Energy Indiana |
| 8 |
|
| 4 | |
Probable Insurance Recoveries(c) |
|
|
|
|
| |
Duke Energy(d) | $ | 813 |
| $ | 813 | |
Duke Energy Carolinas(d) |
| 813 |
|
| 813 | |
|
|
|
|
|
|
|
(a) | Reserves are classified in the respective Condensed Consolidated Balance Sheets in Other within Deferred Credits and Other Liabilities and Other within Current Liabilities. | |||||
(b) | Includes reserves for aforementioned asbestos-related injuries and damages claims. | |||||
(c) | Insurance recoveries are classified in the respective Condensed Consolidated Balance Sheets in Other within Investments and Other Assets and Receivables. | |||||
(d) | Relates to recoveries associated with aforementioned asbestos-related injuries and damages claims. | |||||
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DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
|
|
|
|
|
|
| ||||||||
(in millions) | June 30, 2013 |
| December 31, 2012 | |||||||||||
Reserves for Legal and Other Matters(a) |
|
|
|
|
| |||||||||
Duke Energy(b) | $ | 871 |
| $ | 846 | |||||||||
Duke Energy Carolinas(b) |
| 732 |
|
| 751 | |||||||||
Progress Energy |
| 73 |
|
| 79 | |||||||||
Duke Energy Progress |
| 10 |
|
| 12 | |||||||||
Duke Energy Florida(c) |
| 42 |
|
| 47 | |||||||||
Duke Energy Indiana |
| 8 |
|
| 8 | |||||||||
Probable Insurance Recoveries(d) |
|
|
|
|
| |||||||||
Duke Energy(e) | $ | 781 |
| $ | 781 | |||||||||
Duke Energy Carolinas(e) |
| 781 |
|
| 781 | |||||||||
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|
|
|
|
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| ||||||||
(a) | Reserves are classified in the respective Condensed Consolidated Balance Sheets in Other within Deferred Credits and Other Liabilities and Other within Current Liabilities. | |||||||||||||
(b) | Includes reserves for asbestos-related injuries and damages claims. | |||||||||||||
(c) | Includes workers' compensation claims. | |||||||||||||
(d) | Insurance recoveries are classified in the respective Condensed Consolidated Balance Sheets in Other within Investments and Other Assets and Receivables. | |||||||||||||
(e) | Relates to recoveries associated with aforementioned asbestos-related injuries and damages claims. | |||||||||||||
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Other Commitments and ContingenciesOTHER COMMITMENTS AND CONTINGENCIES
General.General
As part of its normal business, the Duke Energy Registrants are a party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. To varying degrees, these guarantees involve elements of performance and credit risk, which are not included on the respective Condensed Consolidated Balance Sheets. The possibility of any of the Duke Energy Registrants having to honor their contingencies is largely dependent upon future operations of various subsidiaries, investees and other third parties, or the occurrence of certain future events.
In addition, the Duke Energy Registrants enter into various fixed-price, non-cancelable commitments to purchase or sell power (tolling arrangements or power purchase contracts), take-or-pay arrangements, transportation or throughput agreements and other contracts that may or may not be recognized on thetheir respective Condensed Consolidated Balance Sheets. Some of these arrangements may be recognized at fair value on the respective Condensed Consolidated Balance Sheets if such contracts meet the definition of a derivative and the normal purchase Normal purchase/normal sale (NPNS) exception does not apply.
6. Debt and Credit Facilities
Significant changes to In most cases, the Duke Energy Registrants’ debtRegistrants purchase obligation contracts contain provisions for price adjustments, minimum purchase levels and credit facilities since December 31, 2011 are as follows:
First Mortgage Bonds. In March 2012, Duke Energy Indiana issued $250 million principal amount of first mortgage bonds, which carry a fixed interest rate of 4.20% and mature March 15, 2042. Proceeds from the issuances were used to repay a portion of Duke Energy Indiana’s outstanding short-term debt.other financial commitments.
Other Debt. DS Cornerstone, LLC, a 50/50 joint venture entity with a third-party joint venture partner, owns two wind generation projects and has executed a third party financing against the two wind generation projects. In April 2012, Duke Energy and SCOA negotiated a $330 million, Construction and 12-year amortizing Term Loan Facility, on behalf of the borrower, a wholly owned subsidiary of the joint venture. The loan agreement is non-recourse to Duke Energy. Duke Energy received proceeds of $319 million upon execution of the loan agreement. This amount represents reimbursement of a significant portion of Duke Energy’s construction costs incurred as of the date of the agreement.
In January 2012, Duke Energy Carolinas used proceeds from its December 2011 $1 billion issuance of principal amount of first mortgage bonds to repay $750 million 6.25% senior unsecured notes that matured January 15, 2012.
In the first quarter of 2012, Duke Energy completed 55the previously announced sale of International Energy’s indirect 25% ownership interest in Attiki Gas Supply, S.A (Attiki), a Greek corporation, to an existing equity owner in a series of transactions that resulted in the full discharge of the related debt obligation. No gain or loss was recognized on these transactions. As of December 31, 2011, Duke Energy’s investment balance was $64 million and the related debt obligation of $64 million was reflected in Current Maturities of Long-Term Debt on Duke Energy’s Condensed Consolidated Balance Sheets.
On April 4, 2011, Duke Energy filed a registration statement (Form S-3) with the SEC to sell up to $1 billion of variable denomination floating rate demand notes, called PremierNotes. The Form S-3 states that no more than $500 million of the notes will be outstanding at any particular time. The notes are offered on a continuous basis and bear interest at a floating rate per annum determined by the Duke Energy PremierNotes Committee, or its designee, on a weekly basis. The interest rate payable on notes held by an investor may vary based on the principal amount of the investment. The notes have no stated maturity date, but may be redeemed in whole or in part by Duke Energy at any time. The notes are non-transferable and may be redeemed in whole or in part at the investor’s option. Proceeds from the sale of the notes will be used for general corporate purposes. The balance as of June 30, 2012 and December 31, 2011, is $209 million and $79 million, respectively. The notes reflect a short-term debt obligation of Duke Energy and are reflected as Notes payable and commercial paper on Duke Energy’s Condensed Consolidated Balance Sheets.
At June 30, 2012 Duke Energy had $250 million principal amount of 5.65% senior notes due June 2013 classified as Current maturities of long-term debt on Duke Energy’s Condensed Consolidated Balance Sheets. At December 31, 2011, these notes were classified as Long-term Debt on Duke Energy’s Condensed Consolidated Balance Sheets. Duke Energy currently anticipates satisfying this obligation with proceeds from additional borrowings.
At June 30, 2012 and December 31, 2011, Duke Energy Carolinas had $400 million principal amount of 5.625% senior unsecured notes due November 2012 classified as Current maturities of long-term debt on its Condensed Consolidated Balance Sheets. Duke Energy Carolinas currently anticipates satisfying this obligation with proceeds from additional borrowings.
At June 30, 2012 and December 31, 2011, Duke Energy Ohio had $500 million principal amount of 5.70% debentures due September 2012 classified as Current maturities of long-term debt on its Condensed Consolidated Balance Sheets. Duke Energy currently anticipates satisfying this obligation with proceeds from additional borrowings, in connection with the Duke Energy Ohio generation asset transfer, as discussed in Note 4.
At June 30, 2012 Duke Energy Ohio had $250 million principal amount of 2.10% first mortgage bonds due June 2013 classified as Current maturities of long-term debt on Duke Energy Ohio’s Condensed Consolidated Balance Sheets. At December 31, 2011, these notes were classified as Long-term Debt on Duke Energy Ohio’s Condensed Consolidated Balance Sheets. Duke Energy Ohio currently anticipates satisfying this obligation with proceeds from additional borrowings.
Non-Recourse Notes Payable of VIEs. To fund the purchase of receivables, CRC borrows from third parties and such borrowings fluctuate based on the amount of receivables sold to CRC. The borrowings are secured by the assets of CRC and are non-recourse to Duke Energy. The debt is short-term because the facility has an expiration date of October 2012. At June 30, 2012 and December 31, 2011, CRC borrowings were $269 million and $273 million, respectively, and are reflected as Non-recourse notes payable of VIEs on Duke Energy’s Condensed Consolidated Balance Sheets.
Money Pool. The Subsidiary Registrants receive support for their short-term borrowing needs through participation with Duke Energy and certain of its subsidiaries in a money pool arrangement. Under this arrangement, those companies with short-term funds may provide short-term loans to affiliates participating under this arrangement. The money pool is structured such that the Subsidiary Registrants separately manage their cash needs and working capital requirements. Accordingly, there is no net settlement of receivables and payables between the money pool participants. Per the terms of the money pool arrangement, the parent company, Duke Energy may loan funds to its participating subsidiaries, but may not borrow funds
42
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes the money pool. Accordingly, as the money pool activity is between Duke Energy and its wholly owned subsidiaries, all money pool balances are eliminated withinRegistrants’ significant debt issuances since December 31, 2012 (in millions).
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Issuance Date | Maturity Date | Interest Rate |
| Duke Energy (Parent) |
| Duke Energy Progress |
| Duke Energy Indiana |
| Duke Energy | |||||||||||||||||||||||||||||
Unsecured Debt |
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| ||||||||||||||||||||||||||
January 2013(a) | January 2073 | 5.125 | % |
| $ | 500 |
| $ | ― |
| $ | ― |
| $ | 500 | ||||||||||||||||||||||||
June 2013(b) | June 2018 | 2.100 | % |
|
| 500 |
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| ― |
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| ― |
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| 500 | ||||||||||||||||||||||||
Secured Debt |
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February 2013(c)(d) | December 2030 | 2.043 | % |
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| ― |
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| ― |
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| ― |
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| 203 | ||||||||||||||||||||||||
February 2013(c) | June 2037 | 4.740 | % |
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| ― |
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| ― |
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| ― |
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| 220 | ||||||||||||||||||||||||
April 2013(e) | April 2026 | 5.456 | % |
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| ― |
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| ― |
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| ― |
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| 230 | ||||||||||||||||||||||||
First Mortgage Bonds |
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March 2013(f) | March 2043 | 4.100 | % |
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| ― |
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| 500 |
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| ― |
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| 500 | ||||||||||||||||||||||||
June 2013(g) | June 2041 | 4.000 | % |
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| ― |
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| 48 |
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| ― |
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| 48 | ||||||||||||||||||||||||
July 2013(h) | July 2043 | 4.900 | % |
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| ― |
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| ― |
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| 350 |
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| 350 | ||||||||||||||||||||||||
July 2013(h)(i) | July 2016 | 0.619 | % |
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| ― |
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| ― |
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| 150 |
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| 150 | ||||||||||||||||||||||||
Total issuances |
|
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| $ | 1,000 |
| $ | 548 |
| $ | 500 |
| $ | 2,701 | |||||||||||||||||||||||||
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(a) | Callable after January 2018 at par. Proceeds from the issuance were used to redeem the $300 million 7.10% Cumulative Quarterly Income Preferred Securities (QUIPS). The securities were redeemed at par plus accrued and unpaid distributions, payable upon presentation on the redemption date. The remaining net proceeds were used to repay a portion of outstanding commercial paper and for general corporate purposes. See Note 11 for additional information about the QUIPS. | ||||||||||||||||||||||||||||||||||||||
(b) | Proceeds from the issuance were used to repay at maturity the $250 million 5.65% senior notes due June 15, 2013. The remaining net proceeds were used for general corporate purposes, including the repayment of outstanding commercial paper. | ||||||||||||||||||||||||||||||||||||||
(c) | Represents the conversion of construction loans related to a renewable energy project issued in December 2012 to term loans. No cash proceeds were received in conjunction with the conversion. The term loans have varying maturity dates. The maturity date presented represents the latest date for all components of the respective loans. | ||||||||||||||||||||||||||||||||||||||
(d) | The debt is floating rate. Duke Energy has entered into a pay fixed-receive floating interest rate swap for 95 percent of the loans. | ||||||||||||||||||||||||||||||||||||||
(e) | Represents primarily the conversion of a $190 million bridge loan issued in conjunction with the acquisition of Ibener in December 2012. Duke Energy received incremental proceeds of $40 million upon conversion of the bridge loan. The debt is floating rate and is denominated in U.S. dollars. Duke Energy has entered into a pay fixed-receive floating interest rate swap for 75 percent of the loan. | ||||||||||||||||||||||||||||||||||||||
(f) | Proceeds from the issuance were used to repay notes payable to affiliated companies as well as for general corporate purposes. | ||||||||||||||||||||||||||||||||||||||
(g) | Callable after June 2023 at par. Proceeds from the issuance were used to redeem the $48 million 5.375% First Mortgage Bonds due February 2017, which were called for redemption on June 7, 2013. | ||||||||||||||||||||||||||||||||||||||
(h) | Proceeds from the issuances will be used to repay the $400 million, 5.00% unsecured debt due September 15, 2013. | ||||||||||||||||||||||||||||||||||||||
(i) | The debt is floating rate based on 3-month LIBOR and a fixed credit spread of 35 basis points. | ||||||||||||||||||||||||||||||||||||||
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CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current maturities of long-term debt on the Duke Energy’sEnergy Registrants’ respective Condensed Consolidated Balance Sheets. The following table shows the Subsidiary Registrants’ money pool balances and classification within their respectiveDuke Energy Registrants currently anticipate satisfying these obligations with proceeds from additional borrowings, unless otherwise noted.
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(in millions) | Maturity Date | Interest Rate |
| June 30, 2013 | ||||||
Unsecured Debt |
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| ||||
Duke Energy (Parent) | February 2014 | 6.300 | % |
| $ | 750 | ||||
Progress Energy (Parent) | March 2014 | 6.050 | % |
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| 300 | ||||
First Mortgage Bonds |
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Duke Energy Progress | September 2013 | 5.125 | % |
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| 400 | ||||
Duke Energy Carolinas | November 2013 | 5.750 | % |
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| 400 | ||||
Other |
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| 373 | ||||
Current maturities of long-term debt |
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| $ | 2,223 | ||||
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56
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Balance Sheets:Financial Statements – (Continued)
(Unaudited)
| June 30, 2012 |
| December 31, 2011 | ||||||||||||||
(in millions) | Receivables |
| Notes Payable |
| Long-term Debt |
| Receivables |
| Notes Payable |
| Long-term Debt | ||||||
Duke Energy Carolinas | $ | 244 |
| $ | ― |
| $ | 300 |
| $ | 923 |
| $ | ― |
| $ | 300 |
Duke Energy Ohio |
| 181 |
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| ― |
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| ― |
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| 311 |
|
| ― |
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| ― |
Duke Energy Indiana |
| ― |
|
| 113 |
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| 150 |
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| ― |
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| 300 |
|
| 150 |
Increases or decreases in money pool receivables are reflected within investing activities on the respective Subsidiary Registrants’ Condensed Consolidated Statements of Cash Flows, while increases or decreases in money pool borrowings are reflected within financing activities on the respective Subsidiary Registrants Condensed Consolidated Statements of Cash Flows.
Available Credit Facilities. AVAILABLE CREDIT FACILITIES
In November 2011, Duke Energy entered intohas a new $6 billion, five-year master credit facility. The credit facility with $4has a capacity of $6 billion available at closingthrough November 2016 and the remaining $2$5.63 billion became effective July 2, 2012, following the closing of the merger with Progress Energy.through November 2017. The Duke Energy Registrants each have borrowing capacity under the master credit facility up to specified sublimits for each borrower. However, Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. See the table below for the borrowing sublimits for each of the borrowers as of June 30, 2012.2013. The amount available under the master credit facility has been reduced as indicated in the table below, by the use of the master credit facility to backstop the issuances of commercial paper, certain letters of credit and certainvariable-rate demand tax-exempt bonds. As indicated, borrowing sub limitsbonds that may be put to the Duke Energy Registrants at the option of the holder. Borrowing sublimits for the Subsidiary Registrants are also reduced for certain amounts outstanding under the money pool arrangement.
This summary only includes Duke Energy’s master credit facility and, accordingly excludes certain demand facilities and committed facilities that are immaterial in size or which generally support very specific requirements, which primarily include facilities that backstop various outstanding tax-exempt bonds. These facilities that backstop various outstanding tax-exempt bonds generally have non-cancelable terms in excess of one year from the balance sheet date, such that the Duke Energy Registrants have the ability to refinance such borrowings on a long-term basis. Accordingly, such borrowings are reflected as Long-term Debt on the Condensed Consolidated Balance Sheets of the respective Duke Energy Registrant.
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| June 30, 2012 | ||||||||||||||
(in millions) |
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| Duke Energy (Parent) |
| Duke Energy Carolinas |
| Duke Energy Ohio |
| Duke Energy Indiana |
| Total Duke Energy | ||||||||
Facility Size |
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| $ | 1,250 |
| $ | 1,250 |
| $ | 750 |
| $ | 750 |
| $ | 4,000 | |||
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| Notes Payable and Commercial Paper |
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| (518) |
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| (300) |
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| ― |
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| (216) |
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| (1,034) | ||
| Outstanding Letters of Credit |
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| (20) |
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| (7) |
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| ― |
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| ― |
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| (27) | ||
| Tax-Exempt Bonds |
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| ― |
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| (95) |
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| (84) |
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| (81) |
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| (260) | ||
Available Capacity |
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| $ | 712 |
| $ | 848 |
| $ | 666 |
| $ | 453 |
| $ | 2,679 | |||
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| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Duke Energy (Parent) |
| Duke Energy Carolinas |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana |
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| Total Duke Energy | ||||||||||||||||||||||||||||||||
Facility size(a) | $ | 1,750 |
| $ | 1,250 |
| $ | 750 |
| $ | 750 |
| $ | 750 |
| $ | 750 |
| $ | 6,000 | ||||||||||||||||||||||||||
Reduction to backstop issuances |
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| Notes payable and commercial paper(b) |
| (230) |
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| (300) |
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| (197) |
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| (8) |
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| (445) |
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| (150) |
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| (1,330) | |||||||||||||||||||||||||
| Outstanding letters of credit |
| (58) |
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| (7) |
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| (2) |
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| (1) |
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| ― |
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| ― |
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| (68) | |||||||||||||||||||||||||
| Tax-exempt bonds |
| ― |
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| (75) |
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| ― |
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| (84) |
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| (81) |
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| (240) | |||||||||||||||||||||||||
Available capacity | $ | 1,462 |
| $ | 868 |
| $ | 551 |
| $ | 741 |
| $ | 221 |
| $ | 519 |
| $ | 4,362 | ||||||||||||||||||||||||||
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Restrictive Debt Covenants. The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. The master credit facility contains a covenant requiring the debt-to-total capitalization ratio to not exceed 65% for each borrower. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of June 30, 2012, each of the Duke Energy Registrants were in compliance with all covenants related to its significant debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment, or the acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the significant debt or credit agreements contain material adverse change clauses.
(a) | Represents the sublimit of each borrower at June 30, 2013. The Duke Energy Ohio sublimit includes $100 million for Duke Energy Kentucky. | ||||||||||||||||||||||||||||||||||||||||
(b) | Duke Energy issued $450 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas and Duke Energy Indiana. The balances are classified as long-term borrowings within Long-term Debt in Duke Energy Carolina’s and Duke Energy Indiana’s Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||||
7. GoodwillGOODWILL
GOODWILL |
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The following tables present goodwill by reportable operating segment for Duke Energy and Duke Energy Ohio. | |||||||||||||||||||||||||||||||||||||||
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Duke Energy |
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(in millions) | USFE&G |
| Commercial Power |
| International Energy |
| Total | ||||||||||||||||||||||||||||||||
Balance at December 31, 2012 |
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Goodwill | $ | 15,950 |
| $ | 933 |
| $ | 353 |
| $ | 17,236 | ||||||||||||||||||||||||||||
Accumulated impairment charges |
| ― |
|
| (871) |
|
| ― |
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| (871) | ||||||||||||||||||||||||||||
Balance at December 31, 2012, as adjusted for accumulated impairment charges |
| 15,950 |
|
| 62 |
|
| 353 |
|
| 16,365 | ||||||||||||||||||||||||||||
Acquisitions (a) |
| 2 |
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| 2 |
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| (5) |
|
| (1) | ||||||||||||||||||||||||||||
Foreign exchange and other changes |
| (2) |
|
| ― |
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| (17) |
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| (19) | ||||||||||||||||||||||||||||
Balance at June 30, 2013 |
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Goodwill |
| 15,950 |
|
| 935 |
|
| 331 |
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| 17,216 | ||||||||||||||||||||||||||||
Accumulated impairment charges |
| ― |
|
| (871) |
|
| ― |
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| (871) | ||||||||||||||||||||||||||||
Balance at June 30, 2013, as adjusted for accumulated impairment charges | $ | 15,950 |
| $ | 64 |
| $ | 331 |
| $ | 16,345 | ||||||||||||||||||||||||||||
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(a) | Amounts represent purchase price adjustments related to the Progress Energy merger at USFE&G, a minor renewables acquisition at Commercial Power and the Ibener acquisition at International Energy. See Note 2 for further information on purchase price adjustments related to the Progress Energy Merger. | ||||||||||||||||||||||||||||||||||||||
On July 2, 2012, Duke Energy completed the previously announced merger with Progress Energy, which will result in incremental goodwill to Duke Energy in the third quarter of 2012. See Note 2 for additional information.
4357
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
Goodwill |
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| The following tables show goodwill by reportable operating segment for Duke Energy and Duke Energy Ohio: | ||||||||||||
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Duke Energy |
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(in millions) |
| USFE&G |
| Commercial Power |
| International Energy |
| Total | |||||
Balance at December 31, 2011: |
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Goodwill |
| $ | 3,483 |
| $ | 940 |
| $ | 297 |
| $ | 4,720 | |
Accumulated Impairment Charges |
|
| ― |
|
| (871) |
|
| ― |
|
| (871) | |
Balance at December 31, 2011, as adjusted for accumulated impairment charges |
|
| 3,483 |
|
| 69 |
|
| 297 |
|
| 3,849 | |
Balance at June 30, 2012: |
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Goodwill |
|
| 3,483 |
|
| 940 |
|
| 297 |
|
| 4,720 | |
Accumulated Impairment Charges |
|
| ― |
|
| (871) |
|
| ― |
|
| (871) | |
Foreign Exchange and Other Changes |
|
| ― |
|
| ― |
|
| (7) |
|
| (7) | |
Balance at June 30, 2012, as adjusted for accumulated impairment charges |
| $ | 3,483 |
| $ | 69 |
| $ | 290 |
| $ | 3,842 |
Duke Energy Ohio |
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
| ||||
(in millions) | Franchised Electric & Gas |
| Commercial Power |
| Total | ||||||||
Balance at December 31, 2012 |
|
|
|
|
|
|
|
| |||||
Goodwill | $ | 1,137 |
| $ | 1,188 |
| $ | 2,325 | |||||
Accumulated impairment charges |
| (216) |
|
| (1,188) |
|
| (1,404) | |||||
Balance at December 31, 2012, as adjusted for accumulated impairment charges |
| 921 |
|
| ― |
|
| 921 | |||||
Foreign exchange and other changes |
| (1) |
|
| ― |
|
| (1) | |||||
Balance at June 30, 2013 |
|
|
|
|
|
|
|
| |||||
Goodwill |
| 1,136 |
|
| 1,188 |
|
| 2,324 | |||||
Accumulated impairment charges |
| (216) |
|
| (1,188) |
|
| (1,404) | |||||
Balance at June 30, 2013, as adjusted for accumulated impairment charges | $ | 920 |
| $ | ― |
| $ | 920 | |||||
|
|
|
|
|
|
|
|
|
| ||||
Progress Energy
Duke Energy Ohio |
|
|
|
|
|
|
|
|
|
(in millions) |
| Franchised Electric & Gas |
| Commercial Power |
| Total | |||
Balance at December 31, 2011: |
|
|
|
|
|
|
|
|
|
Goodwill |
| $ | 1,137 |
| $ | 1,188 |
| $ | 2,325 |
Accumulated Impairment Charges |
|
| (216) |
|
| (1,188) |
|
| (1,404) |
Balance at December 31, 2011, as adjusted for accumulated impairment charges |
|
| 921 |
|
| ― |
|
| 921 |
Balance at June 30, 2012: |
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 1,137 |
|
| 1,188 |
|
| 2,325 |
Accumulated Impairment Charges |
|
| (216) |
|
| (1,188) |
|
| (1,404) |
Balance at June 30, 2012, as adjusted for accumulated impairment charges |
| $ | 921 |
| $ | ― |
| $ | 921 |
Progress Energy had Goodwill of $3,655 million within the Franchised Electric operating segment as of June 30, 2013 and December 31, 2012, for which there were no accumulated impairment charges.
8. Risk Management, Derivative Instruments and Hedging ActivitiesRISK MANAGEMENT, DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Duke Energy Registrants utilizeclosely monitor the risks associated with commodity price and interest rates changes on their operations and, where appropriate, use various derivativecommodity and interest rate instruments to manage risks primarily associated with commodity pricesthese risks. Certain of these derivative instruments qualify for hedge accounting and interest rates.are designated as hedging instruments, while others either do not qualify as hedges or have not been designated as hedges (hereinafter referred to as undesignated contracts). The Duke Energy Registrants’ primary use of energy commodity derivatives is to hedge the generation portfolio against exposure to changes in the prices of powerelectricity and fuel. Interest rate derivativesswaps are entered into to manage interest rate risk primarily associated with the Duke Energy Registrants’ variable-rate and fixed-rate borrowings.
Certain Additionally, Duke Energy Carolinas’, Duke Energy Progress’ and Duke Energy Florida’s nuclear decommissioning trust fund (NDTF) investment holdings may include certain derivative instruments, qualify for hedge accountingsuch as interest rate swaps and credit default swaps, as part of its overall investment strategy. As further discussed in Note 9 the NDTF’s are managed by third party investment managers who have the discretion to make investment decisions within risk management guidelines determined by management of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida. The fair value of these derivative instruments are included within Nuclear decommissioning trust funds on the Condensed Consolidated Balance Sheets and are designated as either cash flow hedges or fair value hedges, while others either do not qualify asmaterial to the investment balance at June 30, 2013 and December 31, 2012.
The accounting hedges (such as economic hedges) or have not been designated as hedges (hereinafter referred to as undesignated contracts). Allguidance for derivatives requires the recognition of all derivative instruments not meeting the criteria for theidentified as NPNS exception are recognized as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. As the regulated operations ofFor derivative instruments that qualify for hedge accounting, the Duke Energy Registrants meetmay elect to designate such derivatives as either cash flow hedges or fair value hedges. The Duke Energy Registrants offset fair value amounts recognized on the criteriaCondensed Consolidated Balance Sheets related to derivative instruments executed with the same counterparty under the same master netting agreement.
Within the Duke Energy Registrants’ regulated businesses, for regulatory accounting treatment, the majority of the derivative contracts entered into by the regulated operations are notderivatives that would otherwise be designated as cash flow hedges, since gains and losses on suchare reflected as a regulatory liability or asset instead of as a component of AOCI. For derivatives that would otherwise be designated as fair value hedges or left undesignated, gains and losses associated with the change in fair value of these derivative contracts are deferredreflected as a regulatory liabilities and assets, respectively. Thus there isliability or asset. As a result changes in fair value of these derivatives have no immediate earnings impact associated with changes in fair values of such derivative contracts.impact.
ForWithin the Duke Energy Registrants’ unregulated businesses, for derivative instruments that qualify for hedge accounting and are designated as cash flow hedges, the effective portion of the gain or loss is reported as a component of Accumulated Other Comprehensive Income (AOCI)AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any gains or losses on the derivative that represent either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. For derivative instruments that qualify and are designated as a fair value hedge, the gain or loss on the derivative as well as the fully or partially offsetting loss or gain on the hedged item are recognized in earnings in the current period. Any gainsThe Duke Energy Registrants include the gain or lossesloss on the derivative are included in the same line item as the offsetting loss or gain on the hedged item in the Condensed Consolidated Statements of Operations forOperations. Additionally, the Duke Energy Registrants enter into derivative agreements that are economic hedges that either do not qualify for hedge accounting or have not been designated as a hedge. The changes in the Condensed Consolidated Statementsfair value of Comprehensive Income for Duke Energy Carolinas, Duke Energy Ohio, and Duke Energy Indiana.
Information presentedthese undesignated derivative instruments are reflected in the tables below relates to Duke Energy and Duke Energy Ohio. Separate disclosure for Duke Energy Carolinas and Duke Energy Indiana are not always presented as regulatory accounting treatment is applied to substantially all of their derivative instruments.
44
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.current earnings.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
Commodity Price RiskCOMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of market changes in the future prices of electricity (energy, capacity and financial transmission rights), coal and natural gas and emission allowances (SO2 , seasonal NOX and annual NOX) as a result of their energy operations such as electricity generation and the transportation and sale of natural gas. With respect to commodity price risks associated with electricity generation, the Duke Energy Registrants are exposed to changes including, but not limited to, the cost of the coal and natural gas used to generate electricity, the prices of electricity sold in wholesale markets, the cost of capacity and electricity purchased for resale in wholesale markets and the cost of emission allowances primarily at the Duke Energy Registrants’ coal fired power plants. Risks associated with commodity price changes on future operations are closely monitored and, where appropriate, various commodity contracts are used to mitigate the effect of such fluctuations on operations. Exposure to commodity price risk is influenced by a number of factors, including, but not limited to, the term of the contract, the liquidity of the market and delivery location.
58
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Commodity Fair Value Hedges.Hedges
At June 30, 2012,2013, there were no open commodity derivative instruments that were designated as fair value hedges.
Commodity Cash Flow Hedges.
At June 30, 2012, there were no2013, open commodity derivative instruments that were designated as cash flow hedges.hedges were not material.
Undesignated Contracts.
The Duke Energy Registrants use derivative contracts as economic hedges to manage the market risk exposures that arise from providing electricity generation and capacity to large energy customers, energy aggregators, retail customers and other wholesale companies. Undesignated contracts may include contracts not designated as a hedge, contracts that do not qualify for hedge accounting, derivatives that do not or no longer qualify for the NPNS scope exception, and de-designated hedge contracts. These contracts expire as late as 2017.
Undesignated contracts also include contracts associated with operations that Duke Energy continues to wind down or has included as discontinued operations. As these undesignated contracts expire as late as 2021, Duke Energy has entered into economic hedges that leave it minimally exposed to changes in prices over the duration of these contracts.
Duke Energy Carolinas usesand Duke Energy Progress use derivative contracts primarily as economic hedges to manage the market risk exposures that arise from electricity generation. AsDuke Energy Carolinas and Duke Energy Progress have also entered into firm power sale agreements, which are accounted for as derivative instruments, as part of the Interim FERC Mitigation in connection with Duke Energy’s merger with Progress Energy. Duke Energy Carolinas’ undesignated contracts as of June 30, 2012,2013, are primarily associated with forward sales and purchases of power. Duke Energy Carolinas does not haveProgress’ undesignated commodity derivatives.contracts as of June 30, 2013, are primarily associated with forward purchases of fuel used in electricity generation.
Duke Energy Florida uses derivative contracts primarily as economic hedges to manage the market risk exposures that arise from electricity generation. Undesignated contracts at June 30, 2013, are primarily associated with forward purchases of fuel used in electricity generation.
Duke Energy Ohio uses derivative contracts as economic hedges to manage the market risk exposures that arise from providing electricity generation and capacity to large energy customers, energy aggregators, retail customers and other wholesale companies. Undesignated contracts at June 30, 20122013, are primarily associated with forward sales and purchases of power, coal and emission allowances,gas for the Commercial Power segment.
Duke Energy Indiana uses derivative contracts as economic hedges to manage the market risk exposures that arise from electricity generation. Undesignated contracts at June 30, 20122013, are primarily associated with forward purchases and sales of power, and financial transmission rights and emission allowances.rights.
Interest Rate RiskVolumes
The tables below show information relating to the volume of the Duke Energy Registrants outstanding commodity derivative activity. Amounts disclosed represent the notional volumes of commodity contracts accounted for at fair value. For option contracts, notional amounts include only the delta-equivalent volumes which represent the notional volumes times the probability of exercising the option based on current price volatility. Volumes associated with contracts qualifying for the NPNS exception have been excluded from the table below. Amounts disclosed represent the absolute value of notional amounts. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown below. For additional information on notional dollar amounts of debt subject to derivative contracts accounted for at fair value, see “Interest Rate Risk” section below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| June 30, 2013 | ||||||||||||||||||||||||||||||||||||
|
| Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||
Electricity-energy (Gigawatt-hours)(a) | 67,124 |
| 1,634 |
| 1,546 |
| 1,546 |
| ― |
| 64,599 |
| 815 | |||||||||||||||||||||||||
Natural gas (millions of decatherms) | 543 |
| ― |
| 346 |
| 129 |
| 217 |
| 197 |
| ― | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||
|
| Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||
Electricity-energy (Gigawatt-hours)(a) | 52,104 |
| 2,028 |
| 1,850 |
| 1,850 |
| ― |
| 51,215 |
| 97 | |||||||||||||||||||||||||
Natural gas (millions of decatherms) | 528 |
| ― |
| 348 |
| 118 |
| 230 |
| 180 |
| ― | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(a) | Amounts at Duke Energy Ohio included intercompany positions that were eliminated at Duke Energy. |
|
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
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|
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|
|
|
|
| ||||||||||||||||||||||||
INTEREST RATE RISK
The Duke Energy Registrants are exposed to risk resulting from changes in interest rates as a result of their issuance or anticipated issuance of variable and fixed-rate debt and commercial paper. Interest rate exposure is managed by limiting variable-rate exposures to a percentage of total debt and by monitoring the effects of market changes in interest rates. To manage risk associated with changes in interest rates, the
59
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Duke Energy Registrants may enter into financial contracts; primarily interest rate swaps and U.S. Treasury lock agreements. Additionally, in anticipation of certain fixed-rate debt issuances, a series of forward starting interest rate swaps may be executed to lock in components of the market interest rates at the time and terminated prior to or upon the issuance of the corresponding debt. When these transactions occur within a business that meets the criteria for regulatory accounting treatment, these contracts may be treated as undesignated and any pre-taxpretax gain or loss recognized from inception to termination of the hedges would be recorded as a regulatory liability or asset and amortized as a component of interest expense over the life of the debt. Alternatively,In businesses that don’t meet the criteria for regulatory accounting treatment, these derivatives may be designated as hedges whereby any pre-taxpretax gain or loss recognized from inception to termination of the hedges would be recorded in AOCI and amortized as a component of interest expense over the life of the debt.
Duke Energy has a combination foreign exchange, pay fixed-receive floating interest rate swap to fix the US Dollar equivalent payments on a floating rate Chilean debt issue.
As discussed above, within the Duke Energy Carolinas, Duke Energy Progress, and Duke Energy Florida NDTFs, certain of the fixed income investment managers have authorization to use interest rate swaps and credit default swaps in their investment strategies to either manage risk or enhance returns. Notional amounts for these contracts were not included in the table below as they were not material to the investment balance at June 30, 2013 and December 31, 2012.
The following table showstables show the notional amounts for derivatives related to interest rate risk:risk.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
|
| June 30, 2013 | ||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| Duke Energy |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Ohio |
| Duke Energy Indiana | |||||||||||||||||||||||||||||||||||||||
Cash flow hedges(a) |
| $ | 1,140 |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― | ||||||||||||||||||||||||||||||||||
Undesignated contracts(b) |
|
| 585 |
|
| ― |
|
| ― |
|
| 27 |
|
| 200 | ||||||||||||||||||||||||||||||||||
Total notional amount |
| $ | 1,725 |
| $ | ― |
| $ | ― |
| $ | 27 |
| $ | 200 | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| Duke Energy |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Ohio |
| Duke Energy Indiana | |||||||||||||||||||||||||||||||||||||||
Cash flow hedges(a) |
| $ | 1,047 |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― | ||||||||||||||||||||||||||||||||||
Undesignated contracts |
|
| 290 |
|
| 50 |
|
| 50 |
|
| 27 |
|
| 200 | ||||||||||||||||||||||||||||||||||
Fair value hedges |
|
| 250 |
|
| ― |
|
| ― |
|
| 250 |
|
| ― | ||||||||||||||||||||||||||||||||||
Total notional amount |
| $ | 1,587 |
| $ | 50 |
| $ | 50 |
| $ | 277 |
| $ | 200 | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(a) | Duke Energy includes amounts related to non-recourse variable rate long-term debt of VIEs of $592 million and $620 million at June 30, 2013, and at December 31, 2012, respectively. | ||||||||||||||||||||||||||||||||||||||||||||||||
(b) | In July 2013, $200 million of undesignated interest rate swaps at Duke Energy Indiana were terminated due to a new debt issuance. See Note 6 for more information. | ||||||||||||||||||||||||||||||||||||||||||||||||
|
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|
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|
|
| |||||||||||||||||||||||||||||||||
DUKE ENERGY
The following table shows fair value amounts of derivative contracts, and the line items in the Condensed Consolidated Balance Sheets in which such amounts were included. The fair values of derivative contracts are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements where Duke Energy nets the fair value of derivative contracts subject to master netting arrangements with the same counterparty on the Condensed Consolidated Balance Sheets. Cash collateral associated with the derivative contracts were not netted against the fair value amounts.
Notional Amounts of Derivative Instruments Related to Interest Rate | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Duke Energy |
| Duke Energy Carolinas |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||
(in millions) |
| June 30, 2012 | |||||||||||
Cash Flow Hedges(a) |
| $ | 1,130 |
| $ | ― |
| $ | ― |
| $ | ― | |
Undesignated Contracts |
|
| 243 |
|
| ― |
|
| 27 |
|
| 200 | |
Fair Value Hedges |
|
| 275 |
|
| 25 |
|
| 250 |
|
| ― | |
| Total Notional Amount |
| $ | 1,648 |
| $ | 25 |
| $ | 277 |
| $ | 200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
| December 31, 2011 | |||||||||||
Cash Flow Hedges(a) |
| $ | 841 |
| $ | ― |
| $ | ― |
| $ | ― | |
Undesignated Contracts |
|
| 247 |
|
| ― |
|
| 27 |
|
| 200 | |
Fair Value Hedges |
|
| 275 |
|
| 25 |
|
| 250 |
|
| ― | |
| Total Notional Amount |
| $ | 1,363 |
| $ | 25 |
| $ | 277 |
| $ | 200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Includes amounts related to non-recourse variable rate long-term debt of VIEs of $755 million at June 30, 2012 and $466 million at December 31, 2011. |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| June 30, 2013 |
| December 31, 2012 | |||||||||||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | ||||||||||||||||
Derivatives Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current liabilities: other | $ | ― |
| $ | 1 |
| $ | ― |
| $ | 2 | ||||||||||||
Deferred credits and other liabilities: other |
| ― |
|
| 3 |
|
| ― |
|
| 1 | ||||||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current assets: other |
| ― |
|
| ― |
|
| 2 |
|
| ― | ||||||||||||
Investments and other assets: other |
| 10 |
|
| ― |
|
| 7 |
|
| ― | ||||||||||||
Current Liabilities: Other |
| ― |
|
| 50 |
|
| ― |
|
| 81 | ||||||||||||
Deferred credits and other liabilities: other |
| 12 |
|
| 13 |
|
| ― |
|
| 35 | ||||||||||||
Total Derivatives Designated as Hedging Instruments |
| 22 |
|
| 67 |
|
| 9 |
|
| 119 | ||||||||||||
Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current assets: other |
| 50 |
|
| 2 |
|
| 41 |
|
| 2 | ||||||||||||
Investments and other assets: other |
| 137 |
|
| 93 |
|
| 106 |
|
| 50 | ||||||||||||
Current liabilities: other |
| 156 |
|
| 404 |
|
| 106 |
|
| 407 | ||||||||||||
Deferred credits and other liabilities: other |
| 4 |
|
| 208 |
|
| 2 |
|
| 255 | ||||||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current liabilities: other |
| ― |
|
| 37 |
|
| ― |
|
| 76 | ||||||||||||
Deferred credits and other liabilities: other |
| ― |
|
| 5 |
|
| ― |
|
| 8 | ||||||||||||
Total Derivatives Not Designated as Hedging Instruments |
| 347 |
|
| 749 |
|
| 255 |
|
| 798 | ||||||||||||
Total Derivatives | $ | 369 |
| $ | 816 |
| $ | 264 |
| $ | 917 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
4560
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on Duke Energy’s financial position. The amounts shown were calculated by counterparty.
Volumes
The following tables show information relatingMost derivatives are entered into with counterparties under enforceable master netting agreements, or with an Independent System Operator (ISO) such as MISO or PJM. Derivatives entered into with a clearinghouse are usually over-collateralized due to the volumerequirement to post initial margin upon entering into contracts. The amounts shown as offset are limited by the amount of exposure to a counterparty such that an over collateralized position at one counterparty is not allowed to reduce an under collateralized position at another counterparty. In addition to the amounts shown as offset in the table, Duke Energy and Duke Energy Ohio’s outstanding commodity derivative activity. Amounts disclosed represent the notional volumes of commodities contracts accounted for at fair value. For option contracts, notional amounts include only the delta-equivalent volumes which represent the notional volumes times the probability of exercising the option based on current price volatility. Volumes associated with contracts qualifying for the NPNS exceptionmay also have been excluded from the table below. Amounts disclosed represent the absolute value of notional amounts. Duke Energy and Duke Energy Ohio have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positionsavailable accounts receivable or accounts payable that are perfectly offset, no quantities are shown below. For additional information on notional dollar amounts of debt subject to derivative contracts accounted for at fair value, see “Interest Rate Risk” section above.master netting agreements that would offset exposures in the event of bankruptcy.
Underlying Notional Amounts for Commodity Derivative Instruments Accounted for At Fair Value | ||||||
|
|
|
|
|
|
|
|
| Duke Energy |
| Duke Energy Ohio | ||
|
| June 30, 2012 | ||||
Commodity contracts |
|
|
|
|
| |
Electricity-energy (Gigawatt-hours)(a) |
| 10,751 |
|
| 6,773 | |
Emission allowances NOX (thousands of tons) |
| 3 |
|
| 3 | |
Natural gas (millions of decatherms) |
| 30 |
|
| 21 | |
|
|
|
|
|
|
|
|
| December 31, 2011 | ||||
Commodity contracts |
|
|
|
|
| |
Electricity-energy (Gigawatt-hours)(a) |
| 14,118 |
|
| 14,655 | |
Emission allowances NOX (thousands of tons) |
| 9 |
|
| 9 | |
Natural gas (millions of decatherms) |
| 40 |
|
| 2 | |
|
|
|
|
|
|
|
(a) | Amounts at Duke Energy Ohio include intercompany positions that are eliminated at Duke Energy. |
|
|
|
|
|
|
|
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| ||||||||||||||||||||||||||||||||||||||||||||
|
| June 30, 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| |||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 183 |
| $ | 143 |
|
| $ | 369 |
| $ | 287 |
| |||||||||||||||||||||||||||||||||||||||||||||
Gross amounts offset |
| (157) |
|
| (99) |
|
|
| (177) |
|
| (118) |
| |||||||||||||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| 26 |
|
| 44 |
|
|
| 192 |
|
| 169 |
| |||||||||||||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| 22 |
|
| 21 |
|
|
| 123 |
|
| 37 |
| |||||||||||||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | 48 | (a) | $ | 65 | (b) |
| $ | 315 | (c) | $ | 206 | (d) | |||||||||||||||||||||||||||||||||||||||||||||
|
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| ||||||||||||||||||||||||||||||||||||||||||||
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| |||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 127 |
| $ | 96 |
|
| $ | 402 |
| $ | 295 |
| |||||||||||||||||||||||||||||||||||||||||||||
Gross amounts offset |
| (114) |
|
| (54) |
|
|
| (151) |
|
| (90) |
| |||||||||||||||||||||||||||||||||||||||||||||
Net amounts subject to master netting |
| 13 |
|
| 42 |
|
|
| 251 |
|
| 205 |
| |||||||||||||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| 22 |
|
| 19 |
|
|
| 166 |
|
| 54 |
| |||||||||||||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | 35 | (a) | $ | 61 | (b) |
| $ | 417 | (c) | $ | 259 | (d) | |||||||||||||||||||||||||||||||||||||||||||||
|
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| ||||||||||||||||||||||||||||||||||||||||||||
(a) | Included in Other within Current Assets on the Condensed Consolidated Balance Sheet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(d) | Included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||
The amounts of gains and losses recognized on derivative instruments designated and qualifying as cash flow hedges by type of derivative contract, and the Condensed Consolidated Statements of Operations line items in which such gains and losses were included when reclassified from AOCI were as follows. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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| |||||||||||||||||||||||||||||||||||||||||||||||||||
| The following tables show fair value amounts of derivative contracts, and the line item(s) in the Condensed Consolidated Balance Sheets | |||||||||||
in which such amounts are included. The fair values of derivative contracts are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements where Duke Energy nets the fair value of derivative contracts subject to master netting arrangements with the same counterparty on the Condensed Consolidated Balance Sheets. Cash collateral payables and receivables associated with the derivative contracts have not been netted against the fair value amounts. | ||||||||||||
|
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|
|
Location and Fair Value Amounts of Derivatives Reflected in the Condensed Consolidated Balance Sheets | ||||||||||||
|
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|
|
| Duke Energy |
| Duke Energy Ohio | ||||||||
|
| June 30, 2012 | ||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | |||||
Derivatives Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| |
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |
Current Assets: Other | $ | 4 |
| $ | ― |
| $ | 4 |
| $ | ― | |
Current Liabilities: Other |
| ― |
|
| 14 |
|
| ― |
|
| ― | |
Deferred Credits and Other Liabilities: Other |
| ― |
|
| 99 |
|
| ― |
|
| ― | |
Total Derivatives Designated as Hedging Instruments | $ | 4 |
| $ | 113 |
| $ | 4 |
| $ | ― | |
Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| |
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| |
Current Assets: Other(a) | $ | 192 |
| $ | 124 |
| $ | 184 |
| $ | 131 | |
Investments and Other Assets: Other |
| 17 |
|
| ― |
|
| 18 |
|
| 1 | |
Current Liabilities: Other |
| 4 |
|
| 49 |
|
| 3 |
|
| 12 | |
Deferred Credits and Other Liabilities: Other |
| 49 |
|
| 103 |
|
| 47 |
|
| 59 | |
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |
Current Liabilities: Other |
| ― |
|
| 2 |
|
| ― |
|
| 1 | |
Deferred Credits and Other Liabilities: Other(b) |
| ― |
|
| 84 |
|
| ― |
|
| 8 | |
Total Derivatives Not Designated as Hedging Instruments | $ | 262 |
| $ | 362 |
| $ | 252 |
| $ | 212 | |
Total Derivatives | $ | 266 |
| $ | 475 |
| $ | 256 |
| $ | 212 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Amount at Duke Energy includes $23 million related to commodity contracts at Duke Energy Indiana which receive regulatory accounting treatment. | |||||||||||
(b) | Amount at Duke Energy includes $76 million related to interest rate swaps at Duke Energy Indiana which receive regulatory accounting treatment. |
|
| Three Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Pretax Gains (Losses) Recorded in AOCI |
|
|
|
|
|
| ||||||||||||||
Interest rate contracts |
| $ | 58 |
| $ | (44) | ||||||||||||||
Commodity contracts |
|
| ― |
|
| ― | ||||||||||||||
Total Pretax Gains (Losses) Recorded in AOCI |
| $ | 58 |
| $ | (44) | ||||||||||||||
Location of Pretax Losses Reclassified from AOCI into Earnings(a) |
|
|
|
|
|
| ||||||||||||||
Interest rate contracts(b) |
|
|
|
|
|
| ||||||||||||||
Interest expense |
| $ | ― |
| $ | (1) | ||||||||||||||
Total Pretax Losses Reclassified from AOCI into Earnings |
| $ | ― |
| $ | (1) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
| Six Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Pretax Gains (Losses) Recorded in AOCI |
|
|
|
|
|
| ||||||||||||||
Interest rate contracts |
| $ | 71 |
| $ | (26) | ||||||||||||||
Commodity contracts |
|
| 1 |
|
| ― | ||||||||||||||
Total Pretax Gains (Losses) Recorded in AOCI |
| $ | 72 |
| $ | (26) | ||||||||||||||
Location of Pretax Losses Reclassified from AOCI into Earnings(a) |
|
|
|
|
|
| ||||||||||||||
Interest rate contracts(b) |
|
|
|
|
|
| ||||||||||||||
Interest expense |
| $ | (1) |
| $ | (2) | ||||||||||||||
Total Pretax Losses Reclassified from AOCI into Earnings |
| $ | (1) |
| $ | (2) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
(a) | Represents the gains and losses on cash flow hedges previously recorded in AOCI during the term of the hedging relationship and reclassified into earnings during the current period. | |||||||||||||||||||
(b) | Amounts in AOCI related to terminated hedges are reclassified to earnings as the interest expense is recorded. The effective portion of the hedges will be amortized to interest expense over the term of the related debt. | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
4661
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
There was no hedge ineffectiveness during the three and six months ended June 30, 2013 and 2012, and no gains or losses were excluded from the assessment of hedge effectiveness during the same periods.
At June 30, 2013, and 2012, $70 million and $129 million, respectively, of pretax deferred net losses on derivative instruments related to interest rate cash flow hedges were included as a component of AOCI and a $6 million pretax gain is expected to be recognized in earnings during the next 12 months as the hedged transactions occur.
The amounts of pretax gains and losses recognized on undesignated contracts by type of derivative instrument, and the line items in the Condensed Consolidated Statements of Operations in which such gains and losses were included or deferred on the Condensed Consolidated Balance Sheets as regulatory assets or liabilities were as follows.
|
| Duke Energy |
| Duke Energy Ohio | ||||||||
|
| December 31, 2011 | ||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | |||||
Derivatives Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| |
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |
Current Assets: Other | $ | 4 |
| $ | ― |
| $ | 3 |
| $ | ― | |
Investments and Other Assets: Other |
| 2 |
|
| ― |
|
| 2 |
|
| ― | |
Current Liabilities: Other |
| ― |
|
| 11 |
|
| ― |
|
| ― | |
Deferred Credits and Other Liabilities: Other |
| ― |
|
| 76 |
|
| ― |
|
| ― | |
Total Derivatives Designated as Hedging Instruments | $ | 6 |
| $ | 87 |
| $ | 5 |
| $ | ― | |
Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| |
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| |
Current Assets: Other | $ | 81 |
| $ | 31 |
| $ | 79 |
| $ | 39 | |
Investments and Other Assets: Other |
| 35 |
|
| 17 |
|
| 29 |
|
| 18 | |
Current Liabilities: Other |
| 136 |
|
| 168 |
|
| 136 |
|
| 146 | |
Deferred Credits and Other Liabilities: Other |
| 25 |
|
| 93 |
|
| 22 |
|
| 33 | |
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |
Current Liabilities: Other |
| ― |
|
| 2 |
|
| ― |
|
| 1 | |
Deferred Credits and Other Liabilities: Other(a) |
| ― |
|
| 75 |
|
| ― |
|
| 8 | |
Total Derivatives Not Designated as Hedging Instruments | $ | 277 |
| $ | 386 |
| $ | 266 |
| $ | 245 | |
Total Derivatives | $ | 283 |
| $ | 473 |
| $ | 271 |
| $ | 245 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Amounts at Duke Energy include $67 million related to interest rate swaps at Duke Energy Indiana which receive regulatory accounting treatment. |
|
|
|
|
|
|
|
| |||||||
|
| Three Months Ended June 30, | ||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
| ||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||
Revenue, regulated electric |
| $ | 1 |
| $ | ― | ||||||||
Revenue, nonregulated electric, natural gas and other |
|
| 74 |
|
| ― | ||||||||
Fuel used in electric generation and purchased power regulated |
|
| (37) |
|
| ― | ||||||||
Fuel used in electric generation and purchased power - nonregulated |
|
| (11) |
|
| ― | ||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||
Interest expense |
|
| (5) |
|
| ― | ||||||||
Total Pretax Losses Recognized in Earnings |
| $ | 22 |
| $ | ― | ||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||
Regulatory asset |
| $ | (110) |
| $ | 1 | ||||||||
Regulatory liability |
|
| 9 |
|
| 17 | ||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||
Regulatory asset |
|
| 26 |
|
| (32) | ||||||||
Total Pretax Losses Recognized as Regulatory Assets of Liabilities |
| $ | (75) |
| $ | (14) | ||||||||
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
| |||||||
|
| Six Months Ended June 30, | ||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
| ||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||
Revenue, regulated electric |
| $ | 7 |
| $ | ― | ||||||||
Revenue, nonregulated electric, natural gas and other |
|
| (8) |
|
| 36 | ||||||||
Fuel used in electric generation and purchased power regulated |
|
| (89) |
|
| ― | ||||||||
Fuel used in electric generation and purchased power - nonregulated |
|
| (18) |
|
| ― | ||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||
Interest expense |
|
| (9) |
|
| ― | ||||||||
Total Pretax (Losses) Gains Recognized in Earnings |
| $ | (117) |
| $ | 36 | ||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||
Regulatory asset |
| $ | (5) |
| $ | ― | ||||||||
Regulatory liability |
|
| 4 |
|
| 22 | ||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||
Regulatory asset |
|
| 39 |
|
| (10) | ||||||||
Total Pretax Gains Recognized as Regulatory Assets of Liabilities |
| $ | 38 |
| $ | 12 | ||||||||
|
|
|
|
|
|
|
| |||||||
DUKE ENERGY CAROLINAS
The following table shows fair value amounts of derivative contracts, and the line items in the Condensed Consolidated Balance Sheets in which such amounts were included. The fair values of derivative contracts are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements where Duke Energy Carolinas nets the fair value of derivative contracts subject to master netting arrangements with the same counterparty on the Condensed Consolidated Balance Sheets. Cash collateral associated with the derivative contracts were not netted against the fair value amounts.
| The following table shows the amount of the gains and losses recognized on derivative instruments designated and qualifying as | |||||
cash flow hedges by type of derivative contract, and the Condensed Consolidated Statements of Operations line items in which such gains and losses are included for Duke Energy. | ||||||
|
|
|
|
|
|
|
Cash Flow Hedges—Location and Amount of Pre-Tax Gains (Losses) Recognized in Comprehensive Income | ||||||
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
|
| June 30, | ||||
(in millions) | 2012 |
| 2011 | |||
Pre-tax Gains (Losses) Recorded in AOCI |
|
|
|
|
| |
Interest rate contracts | $ | (44) |
| $ | (10) | |
Total Pre-tax Gains (Losses) Recorded in AOCI | $ | (44) |
| $ | (10) | |
Location of Pre-tax Gains (Losses) Reclassified from AOCI into Earnings(a) |
|
|
|
|
| |
Interest rate contracts |
|
|
|
|
| |
Interest expense | $ | (1) |
| $ | (2) | |
Total Pre-tax Gains (Losses) Reclassified from AOCI into Earnings | $ | (1) |
| $ | (2) | |
|
|
|
|
|
|
|
(a) | Represents the gains and losses on cash flow hedges previously recorded in AOCI during the term of the hedging relationship and reclassified into earnings during the current period. |
|
| Six Months Ended | ||||
|
| June 30, | ||||
(in millions) | 2012 |
| 2011 | |||
Pre-tax Gains (Losses) Recorded in AOCI |
|
|
|
|
| |
Interest rate contracts | $ | (26) |
| $ | (7) | |
Total Pre-tax Gains (Losses) Recorded in AOCI | $ | (26) |
| $ | (7) | |
Location of Pre-tax Gains and (Losses) Reclassified from AOCI into Earnings(a) |
|
|
|
|
| |
Interest rate contracts |
|
|
|
|
| |
Interest expense | $ | (2) |
| $ | (3) | |
Total Pre-tax Gains (Losses) Reclassified from AOCI into Earnings | $ | (2) |
| $ | (3) | |
|
|
|
|
|
|
|
(a) | Represents the gains and losses on cash flow hedges previously recorded in AOCI during the term of the hedging relationship and reclassified into earnings during the current period. |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| June 30, 2013 |
| December 31, 2012 | ||||||||||||||||||||||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | |||||||||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Commodity contracts(a) |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Current liabilities: other | $ | ― |
| $ | 3 |
| $ | ― |
| $ | 6 | |||||||||||||||||||||||
Deferred credits and other liabilities: other |
| ― |
|
| 1 |
|
| ― |
|
| 6 | |||||||||||||||||||||||
Total Derivatives Not Designated as Hedging Instruments |
| ― |
|
| 4 |
|
| ― |
|
| 12 | |||||||||||||||||||||||
Total Derivatives | $ | ― |
| $ | 4 |
| $ | ― |
| $ | 12 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(a) | Substantially all of these contracts receive regulatory accounting treatment. | |||||||||||||||||||||||||||||||||
4762
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on Duke Energy Carolinas’ financial position. The amounts shown were calculated by counterparty.
Most derivatives are entered into with counterparties under enforceable master netting agreements. Derivatives entered into with a clearinghouse are usually over-collateralized due to the requirement to post initial margin upon entering into contracts. The amounts shown as offset are limited by the amount of exposure to a counterparty such that an over collateralized position at one counterparty is not allowed to reduce an under collateralized position at another counterparty. In addition to the amounts shown as offset in the table, Duke Energy Carolinas may also have available accounts receivable or accounts payable to offset exposures in the event of bankruptcy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
| June 30, 2013 | ||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| |||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | ― |
| $ | ― |
|
| $ | ― |
| $ | ― |
| |||||||||||||||||||||||||||||||
Gross amounts offset |
| ― |
|
| ― |
|
|
| ― |
|
| ― |
| |||||||||||||||||||||||||||||||
Net amount subject to master netting |
| ― |
|
| ― |
|
|
| ― |
|
| ― |
| |||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
| ― |
|
|
| 3 |
|
| 1 |
| |||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | ― |
| $ | ― |
|
| $ | 3 | (a) | $ | 1 | (b) | |||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| |||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | ― |
| $ | ― |
|
| $ | ― |
| $ | ― |
| |||||||||||||||||||||||||||||||
Gross amounts offset |
| ― |
|
| ― |
|
|
| ― |
|
| ― |
| |||||||||||||||||||||||||||||||
Net amount subject to master netting |
| ― |
|
| ― |
|
|
| ― |
|
| ― |
| |||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
| ― |
|
|
| 6 |
|
| 6 |
| |||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | ― |
| $ | ― |
|
| $ | 6 | (a) | $ | 6 | (b) | |||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||
(a) | Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet. |
|
|
| ||||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet. |
|
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| ||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||
Losses on cash flow hedges reclassified at Duke Energy Carolinas for the three and six months ended June 30, 2013 and 2012 were not material.
For the three and six months ended June 30, 2013 and 2012, there were $24 million of pretax deferred net losses on settled interest rate cash flow hedges remaining in AOCI for Duke Energy Carolinas.
For the three and six months ended June 30, 2013 and 2012, pretax losses recognized on undesignated contracts for Duke Energy Carolinas were insignificant.
PROGRESS ENERGY
The following table shows fair value amounts of derivative contracts, and the line items in the Condensed Consolidated Balance Sheets in which such amounts were included. The fair values of derivative contracts are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements where Progress Energy nets the fair value of derivative contracts subject to master netting arrangements with the same counterparty on the Condensed Consolidated Balance Sheets. Cash collateral associated with the derivative contracts were not netted against the fair value amounts.
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| ||||||||||||||||||||||
|
| June 30, 2013 |
| December 31, 2012 | ||||||||||||||||||||||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | |||||||||||||||||||||||||||
Derivatives Designated as Hedging Instruments |
|
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| |||||||||||||||||||||||
Commodity contracts |
|
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|
|
| |||||||||||||||||||||||
Current liabilities: other | $ | ― |
| $ | 1 |
| $ | ― |
| $ | 2 | |||||||||||||||||||||||
Deferred credits and other liabilities: other |
| ― |
|
| 1 |
|
| ― |
|
| 1 | |||||||||||||||||||||||
Total Derivatives Designated as Hedging Instruments |
| ― |
|
| 2 |
|
| ― |
|
| 3 | |||||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments |
|
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| |||||||||||||||||||||||
Commodity contracts(a) |
|
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|
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|
|
|
|
| |||||||||||||||||||||||
Current assets: other |
| ― |
|
| ― |
|
| 3 |
|
| ― | |||||||||||||||||||||||
Investments and other assets: other |
| ― |
|
| ― |
|
| 8 |
|
| ― | |||||||||||||||||||||||
Current liabilities: other |
| 4 |
|
| 175 |
|
| ― |
|
| 231 | |||||||||||||||||||||||
Deferred credits and other liabilities: other |
| 2 |
|
| 154 |
|
| ― |
|
| 195 | |||||||||||||||||||||||
Interest rate contracts |
|
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Current liabilities: other |
| ― |
|
| ― |
|
| ― |
|
| 11 | |||||||||||||||||||||||
Total Derivatives Not Designated as Hedging Instruments |
| 6 |
|
| 329 |
|
| 11 |
|
| 437 | |||||||||||||||||||||||
Total Derivatives | $ | 6 |
| $ | 331 |
| $ | 11 |
| $ | 440 | |||||||||||||||||||||||
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| ||||||||||||||||||||||
(a) | Substantially all of these contracts receive regulatory treatment. | |||||||||||||||||||||||||||||||||
63
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on Progress Energy’s financial position. The amounts shown were calculated by counterparty.
Most derivatives are entered into with counterparties under enforceable master netting agreements. Derivatives entered into with a clearinghouse are usually over-collateralized due to the requirement to post initial margin upon entering into contracts. The amounts shown as offset are limited by the amount of exposure to a counterparty such that an over collateralized position at one counterparty is not allowed to reduce an under collateralized position at another counterparty. In addition to the amounts shown as offset in the table, Progress Energy may also have available accounts receivable or accounts payables to offset exposures in the event of bankruptcy.
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| |||||||||||||||||||||||||||||||||||||||||||||||
|
| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 4 |
| $ | 2 |
|
| $ | 176 |
| $ | 151 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts offset |
| (4) |
|
| (2) |
|
|
| (17) |
|
| (21) |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| ― |
|
| ― |
|
|
| 159 |
|
| 130 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
| ― |
|
|
| ― |
|
| 4 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | ― | (a) | $ | ― | (b) |
| $ | 159 | (c) | $ | 134 | (d) | ||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||
|
| December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 3 |
| $ | 8 |
|
| $ | 244 |
| $ | 192 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts offset |
| ― |
|
| ― |
|
|
| (22) |
|
| (36) |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| 3 |
|
| 8 |
|
|
| 222 |
|
| 156 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
| ― |
|
|
| ― |
|
| 4 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | 3 | (a) | $ | 8 | (b) |
| $ | 222 | (c) | $ | 160 | (d) | ||||||||||||||||||||||||||||||||||||||||||||||||
|
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|
| |||||||||||||||||||||||||||||||||||||||||||||||
(a) | Included in Other within Current Assets on the Condensed Consolidated Balance Sheet. |
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet. |
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet. |
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(d) | Included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet. |
|
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The amounts of gains and losses recognized on derivative instruments designated and qualifying as cash flow hedges by type of derivative contract, and the Condensed Consolidated Statements of Operations and Comprehensive Income line items in which such gains and losses were included when reclassified from AOCI were as follows. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax Losses Recorded in AOCI |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts |
| $ | ― |
| $ | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Pretax Losses Recorded in AOCI |
| $ | ― |
| $ | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Location of Pretax Losses Reclassified from AOCI into Earnings(a) |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts(b) |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense |
| $ | ― |
| $ | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Pretax Losses Reclassified from AOCI into Earnings |
| $ | ― |
| $ | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax Gains (Losses) Recorded in AOCI |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts |
| $ | ― |
| $ | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity contracts |
|
| 1 |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Pretax Gains (Losses) Recorded in AOCI |
| $ | 1 |
| $ | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Location of Pretax Losses Reclassified from AOCI into Earnings(a) |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts(b) |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense |
| $ | ― |
| $ | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Pretax Losses Reclassified from AOCI into Earnings |
| $ | ― |
| $ | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(a) | Represents the gains and losses on cash flow hedges previously recorded in AOCI during the term of the hedging relationships and reclassified into earnings during the current period. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Amounts in AOCI related to terminated hedges are reclassified to earnings as the interest expense is recorded. The effective portion of the hedges will be amortized to interest expense over the term of the related debt. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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64
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
At June 30, 2013 and 2012, $63 million and $235 million, respectively, of pretax deferred net losses on derivative instruments related to interest rate cash flow hedges were included as a component of AOCI and a $5 million pretax loss is expected to be recognized in earnings during the next 12 months as the hedged transactions occur. Effective with the merger, Progress Energy no longer designates derivative instruments related to interest rate cash flow hedges for regulated operations as cash flow hedges. As a result, the pretax losses on open derivative contracts as of the date of the merger were reclassified from AOCI to Regulatory assets.
The amounts of pretax gains and losses recognized on undesignated contracts by type of derivative instrument, and the line items in the Consolidated Statements of Operations and Comprehensive Income in which such gains and losses were included or deferred on the Condensed Consolidated Balance Sheets as regulatory assets or liabilities were as follows.
|
|
|
|
|
|
|
| |||||||||||||
|
| Three Months Ended June 30, | ||||||||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
| ||||||||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||||||||
Revenue, regulated electric |
| $ | 1 |
| $ | ― | ||||||||||||||
Fuel used in electric generation and purchased power - regulated(a) |
|
| (37) |
|
| (155) | ||||||||||||||
Other income and expenses, net |
|
| ― |
|
| 3 | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Interest expense |
|
| (5) |
|
| ― | ||||||||||||||
Total Pretax Losses Recognized in Earnings |
| $ | (41) |
| $ | (152) | ||||||||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||||||||
Commodity contracts(b) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
| $ | (108) |
| $ | 38 | ||||||||||||||
Regulatory liability |
|
| ― |
|
| ― | ||||||||||||||
Interest rate contracts(c) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
|
| 4 |
|
| ― | ||||||||||||||
Total Pretax (Losses) Gains Recognized as Regulatory Assets of Liabilities |
| $ | (104) |
| $ | 38 | ||||||||||||||
|
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| |||||||||||||
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| |||||||||||||
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| |||||||||||||
|
| Six Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
| ||||||||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||||||||
Revenue, regulated electric |
| $ | 7 |
| $ | ― | ||||||||||||||
Fuel used in electric generation and purchased power - regulated(a) |
|
| (89) |
|
| (260) | ||||||||||||||
Other income and expenses, net |
|
| ― |
|
| 11 | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Interest expense |
|
| (9) |
|
| ― | ||||||||||||||
Total Pretax Losses Recognized in Earnings |
| $ | (91) |
| $ | (249) | ||||||||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||||||||
Commodity contracts(b) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
| $ | (3) |
| $ | (168) | ||||||||||||||
Interest rate contracts(c) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
|
| 9 |
|
| ― | ||||||||||||||
Total Pretax Gains (Losses) Recognized as Regulatory Assets of Liabilities |
| $ | 6 |
| $ | (168) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
(a) | After the derivatives are settled and the fuel is consumed, gains or losses are passed through the fuel cost-recovery clause. | |||||||||||||||||||
(b) | Amounts are recorded as regulatory assets and liabilities in the Condensed Consolidated Balance Sheets until gains or losses are passed through the fuel cost-recovery clause. | |||||||||||||||||||
(c) | Amounts in regulatory assets and liabilities related to terminated hedges are reclassified to earnings as the interest expense is recorded. The hedges will be amortized to interest expense over the term of the related debt. | |||||||||||||||||||
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| |||||||||||||
DUKE ENERGY PROGRESS
The fair value amounts of derivative contracts, and the line items in the Condensed Consolidated Balance Sheets in which such amounts were included were as follows. The fair values of derivative contracts are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements where Duke Energy Progress nets the fair value of derivative contracts subject to master netting arrangements with the same counterparty on the Condensed Consolidated Balance Sheets. Cash collateral associated with the derivative contracts were not netted against the fair value amounts.
|
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|
|
| ||||||||||||||||||||||
|
| June 30, 2013 |
| December 31, 2012 | ||||||||||||||||||||||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | |||||||||||||||||||||||||||
Derivatives Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Current liabilities: other | $ | ― |
| $ | 1 |
| $ | ― |
| $ | 1 | |||||||||||||||||||||||
Deferred credits and other liabilities: other |
| ― |
|
| 1 |
|
| ― |
|
| 1 | |||||||||||||||||||||||
Total Derivatives Designated as Hedging Instruments |
| ― |
|
| 2 |
|
| ― |
|
| 2 | |||||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Commodity contracts(a) |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Current assets: other |
| ― |
|
| ― |
|
| 1 |
|
| ― | |||||||||||||||||||||||
Investments and other assets: other |
| ― |
|
| ― |
|
| 1 |
|
| ― | |||||||||||||||||||||||
Current liabilities: other |
| 1 |
|
| 67 |
|
| ― |
|
| 85 | |||||||||||||||||||||||
Deferred credits and other liabilities: other |
| ― |
|
| 56 |
|
| ― |
|
| 68 | |||||||||||||||||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Current liabilities: other |
| ― |
|
| ― |
|
| ― |
|
| 11 | |||||||||||||||||||||||
Total Derivatives Not Designated as Hedging Instruments |
| 1 |
|
| 123 |
|
| 2 |
|
| 164 | |||||||||||||||||||||||
Total Derivatives | $ | 1 |
| $ | 125 |
| $ | 2 |
| $ | 166 | |||||||||||||||||||||||
|
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|
| ||||||||||||||||||||||
(a) | Substantially all of these contracts receive regulatory treatment. | |||||||||||||||||||||||||||||||||
65
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on Duke Energy Progress’ financial position. The amounts shown were calculated by counterparty.
Most derivatives are entered into with counterparties under enforceable master netting agreements. Derivatives entered into with a clearinghouse are usually over-collateralized due to the requirement to post initial margin upon entering into contracts. The amounts shown as offset are limited by the amount of exposure to a counterparty such that an over collateralized position at one counterparty is not allowed to reduce an under collateralized position at another counterparty. In addition to the amounts shown as offset in the table, Duke Energy Progress may also have available accounts receivable or accounts payable to offset exposures in the events of bankruptcy.
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| ||||||||||||||||||||||||||||||||||||||||||||
|
| June 30, 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| |||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 1 |
| $ | ― |
|
| $ | 68 |
| $ | 57 |
| |||||||||||||||||||||||||||||||||||||||||||||
Gross amounts offset |
| (1) |
|
| ― |
|
|
| (2) |
|
| (3) |
| |||||||||||||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| ― |
|
| ― |
|
|
| 66 |
|
| 54 |
| |||||||||||||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
| ― |
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| ― |
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| ― |
| |||||||||||||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | ― | (a) | $ | ― | (b) |
| $ | 66 | (c) | $ | 54 | (d) | |||||||||||||||||||||||||||||||||||||||||||||
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| December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| |||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 1 |
| $ | 1 |
|
| $ | 97 |
| $ | 69 |
| |||||||||||||||||||||||||||||||||||||||||||||
Gross amounts offset |
| ― |
|
| ― |
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| (2) |
|
| (7) |
| |||||||||||||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| 1 |
|
| 1 |
|
|
| 95 |
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| 62 |
| |||||||||||||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
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| ― |
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| ― |
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| ― |
| |||||||||||||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | 1 | (a) | $ | 1 | (b) |
| $ | 95 | (c) | $ | 62 | (d) | |||||||||||||||||||||||||||||||||||||||||||||
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(a) | Included in Other within Current Assets on the Condensed Consolidated Balance Sheet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(d) | Included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The amounts of gains and losses recognized on derivative instruments designated and qualifying as cash flow hedges by type of derivative contract, and the Condensed Consolidated Statements of Operations and Comprehensive Income line items in which such gains and losses were included when reclassified from AOCI were as follows. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
| Three Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Pretax Gains and (Losses) Recorded in AOCI |
|
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|
|
| ||||||||||||||
Interest rate contracts(b) |
| $ | ― |
| $ | (12) | ||||||||||||||
Total Pretax Losses Recorded in AOCI |
| $ | ― |
| $ | (12) | ||||||||||||||
Location of Pretax Gains and (Losses) Reclassified from AOCI into Earnings(a) |
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Interest rate contracts(b) |
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Interest expense |
| $ | ― |
| $ | (2) | ||||||||||||||
Total Pretax Losses Reclassified from AOCI into Earnings |
| $ | ― |
| $ | (2) | ||||||||||||||
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| Six Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Pretax Gains and (Losses) Recorded in AOCI |
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| ||||||||||||||
Interest rate contracts(b) |
| $ | ― |
| $ | (7) | ||||||||||||||
Total Pretax Losses Recorded in AOCI |
| $ | ― |
| $ | (7) | ||||||||||||||
Location of Pretax Gains and (Losses) Reclassified from AOCI into Earnings(a) |
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Interest rate contracts |
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| ||||||||||||||
Interest expense |
| $ | ― |
| $ | (5) | ||||||||||||||
Total Pretax Losses Reclassified from AOCI into Earnings |
| $ | ― |
| $ | (5) | ||||||||||||||
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(a) | Represents the gains and losses on cash flow hedges previously recorded in AOCI during the term of the hedging relationships and reclassified into earnings during the current period. | |||||||||||||||||||
(b) | Amounts in AOCI related to terminated hedges are reclassified to earnings as the interest expense is recorded. The effective portion of the hedges will be amortized to interest expense over the term of the related debt. | |||||||||||||||||||
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66
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
At June 30, 2012, $118 million of pretax deferred net losses on derivative instruments related to interest rate cash flow hedges were included as a component of AOCI. Effective with the merger, Duke Energy Progress no longer designates derivative instruments related to interest rate cash flow hedges for regulated operations as cash flow hedges. As a result, the pretax losses on open derivative contracts as of the date of the merger were reclassified from AOCI to Regulatory assets.
The amounts of pretax gains and losses recognized on undesignated contracts by type of derivative instrument and the line items in the Condensed Consolidated Statements of Operations and Comprehensive Income in which such gains and losses were included or deferred on the Condensed Consolidated Balance Sheets as regulatory assets or liabilities were as follows.
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| |||||||||||||
|
| Three Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
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| ||||||||||||||
Commodity contracts |
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| ||||||||||||||
Revenue, regulated electric |
| $ | 1 |
| $ | ― | ||||||||||||||
Fuel used in electric generation and purchased power -regulated(a) |
|
| (12) |
|
| (39) | ||||||||||||||
Other income and expenses, net |
|
| ― |
|
| 3 | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Interest expense |
|
| (3) |
|
| ― | ||||||||||||||
Total Pretax Losses Recognized in Earnings |
| $ | (14) |
| $ | (36) | ||||||||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||||||||
Commodity contracts(b) |
|
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|
|
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| ||||||||||||||
Regulatory asset |
| $ | (43) |
| $ | 10 | ||||||||||||||
Interest rate contracts(c) |
|
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|
|
|
| ||||||||||||||
Regulatory asset |
|
| 4 |
|
| ― | ||||||||||||||
Total Pretax (Losses) Gains Recognized as Regulatory Assets of Liabilities |
| $ | (39) |
| $ | 10 | ||||||||||||||
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| |||||||||||||
|
| Six Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
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| ||||||||||||||
Commodity contracts |
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|
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| ||||||||||||||
Revenue, regulated electric |
| $ | 7 |
| $ | ― | ||||||||||||||
Fuel used in electric generation and purchased power - regulated(a) |
|
| (29) |
|
| (65) | ||||||||||||||
Other income and expenses, net |
|
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|
| 3 | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Interest expense |
|
| (6) |
|
| ― | ||||||||||||||
Total Pretax Losses Recognized in Earnings |
| $ | (28) |
| $ | (62) | ||||||||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||||||||
Commodity contracts(b) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
| $ | (7) |
| $ | (49) | ||||||||||||||
Interest rate contracts(c) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
|
| 7 |
|
| ― | ||||||||||||||
Total Pretax Losses Recognized as Regulatory Assets of Liabilities |
| $ | ― |
| $ | (49) | ||||||||||||||
|
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|
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| |||||||||||||
(a) | After the derivatives are settled and the fuel is consumed, gains or losses are passed through the fuel cost-recovery clause. | |||||||||||||||||||
(b) | Amounts are recorded in regulatory assets and liabilities in the Condensed Consolidated Balance Sheets until gains or losses are passed through the fuel cost-recovery clause. | |||||||||||||||||||
(c) | Amounts in regulatory assets and liabilities related to terminated hedges are reclassified to earnings as the interest expense is recorded. The hedges will be amortized to interest expense over the term of the related debt. | |||||||||||||||||||
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| |||||||||||||
DUKE ENERGY FLORIDA
The fair value amounts of derivative contracts, and the line items in the Condensed Balance Sheets in which such amounts were included were as follows. The fair value of derivative contracts are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements where Duke Energy Florida nets the fair value of derivative contracts subject to master netting arrangements with the same counterparty on the Condensed Balance Sheets. Cash collateral associated with the derivative contracts were not netted against the fair value amounts.
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| ||||||||||||||||||||||
|
| June 30, 2013 |
| December 31, 2012 | ||||||||||||||||||||||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | |||||||||||||||||||||||||||
Derivatives Designated as Hedging Instruments |
|
|
|
|
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|
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|
|
| |||||||||||||||||||||||
Commodity contracts |
|
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|
| |||||||||||||||||||||||
Current liabilities: other | $ | ― |
| $ | 1 |
| $ | ― |
| $ | 1 | |||||||||||||||||||||||
Total Derivatives Designated as Hedging Instruments |
| ― |
|
| 1 |
|
| ― |
|
| 1 | |||||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments |
|
|
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|
|
|
|
|
|
|
| |||||||||||||||||||||||
Commodity contracts(a) |
|
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|
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| |||||||||||||||||||||||
Current Assets: Other |
| ― |
|
| ― |
|
| 2 |
|
| ― | |||||||||||||||||||||||
Investments and Other Assets: Other |
| ― |
|
| ― |
|
| 7 |
|
| ― | |||||||||||||||||||||||
Current liabilities: other |
| 3 |
|
| 107 |
|
| ― |
|
| 146 | |||||||||||||||||||||||
Deferred credits and other liabilities: other |
| 2 |
|
| 94 |
|
| ― |
|
| 123 | |||||||||||||||||||||||
Total Derivatives Not Designated as Hedging Instruments |
| 5 |
|
| 201 |
|
| 9 |
|
| 269 | |||||||||||||||||||||||
Total Derivatives | $ | 5 |
| $ | 202 |
| $ | 9 |
| $ | 270 | |||||||||||||||||||||||
|
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|
|
| ||||||||||||||||||||||
(a) | Substantially all of these contracts receive regulatory treatment. | |||||||||||||||||||||||||||||||||
67
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on Duke Energy Florida’s financial position. The amounts shown were calculated by counterparty.
Most derivatives are entered into with counterparties under enforceable master netting agreements. Derivatives entered into with a clearinghouse are usually over-collateralized due to the requirement to post initial margin upon entering into contracts. The amounts shown as offset are limited by the amount of exposure to a counterparty such that an over collateralized position at one counterparty is not allowed to reduce an under collateralized position at another counterparty. In addition to the amounts offset in the table, Duke Energy Florida may also have available accounts receivable or accounts payable to offset exposures in the event of bankruptcy.
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| |||||||||||||||||||||||||||||||||
|
| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| ||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 3 |
| $ | 2 |
|
| $ | 108 |
| $ | 94 |
| ||||||||||||||||||||||||||||||||||
Gross amounts offset |
| (3) |
|
| (2) |
|
|
| (15) |
|
| (18) |
| ||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| ― |
|
| ― |
|
|
| 93 |
|
| 76 |
| ||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
| ― |
|
|
| ― |
|
| ― |
| ||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Balance Sheet | $ | ― | (a) | $ | ― | (b) |
| $ | 93 | (c) | $ | 76 | (d) | ||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||
|
| December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| ||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 2 |
| $ | 7 |
|
| $ | 147 |
| $ | 123 |
| ||||||||||||||||||||||||||||||||||
Gross amounts offset |
| ― |
|
| ― |
|
|
| (20) |
|
| (29) |
| ||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| 2 |
|
| 7 |
|
|
| 127 |
|
| 94 |
| ||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
| ― |
|
|
| ― |
|
| ― |
| ||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Balance Sheet | $ | 2 | (a) | $ | 7 | (b) |
| $ | 127 | (c) | $ | 94 | (d) | ||||||||||||||||||||||||||||||||||
|
|
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|
|
| |||||||||||||||||||||||||||||||||
(a) | Included in Other within Current Assets on the Condensed Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Investments and Other Assets on the Condensed Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities on the Condensed Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
(d) | Included in Other within Deferred Credits and Other Liabilities on the Condensed Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
|
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| |||||||||||||||||||||||||||||||||
Gains on cash flow hedges recorded or reclassified at Duke Energy Florida for the three months and six months ended June 30, 2013 and 2012 were not material.
At June 30, 2012, $43 million of pretax deferred net losses on derivative instruments related to outstanding interest rate cash flow hedges were included as a component of AOCI. Effective with the merger, Duke Energy Florida no longer designates derivative instruments related to interest rate cash flow hedges for regulated operations as cash flow hedges. As a result, the pretax losses on open derivative contracts as of the date of the merger were reclassified from AOCI to Regulatory assets.
The amounts of pretax gains and losses recognized on undesignated contracts by type of derivative instrument and the line items in the Condensed Statements of Operations and Comprehensive Income in which such gains and losses were included or deferred on the Condensed Balance Sheets as regulatory assets or liabilities were as follows.
|
|
|
|
|
|
|
| |||||||||||||
|
| Three Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
| ||||||||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||||||||
Fuel used in electric generation and purchased power - regulated(a) |
| $ | (25) |
| $ | (116) | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Interest expense |
|
| (1) |
|
| ― | ||||||||||||||
Total Pretax Losses Recognized in Earnings |
| $ | (26) |
| $ | (116) | ||||||||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||||||||
Commodity contracts(b) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
| $ | (66) |
| $ | 28 | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
|
| 1 |
|
| ― | ||||||||||||||
Total Pretax (Losses) Gains Recognized as Regulatory Assets of Liabilities |
| $ | (65) |
| $ | 28 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
| Six Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
| ||||||||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||||||||
Fuel used in electric generation and purchased power - regulated(a) |
| $ | (60) |
| $ | (195) | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Interest expense |
|
| (2) |
|
| ― | ||||||||||||||
Total Pretax Losses Recognized in Earnings |
| $ | (62) |
| $ | (195) | ||||||||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||||||||
Commodity contracts(b) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
| $ | 3 |
| $ | (119) | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
|
| 2 |
|
| ― | ||||||||||||||
Total Pretax Gains (Losses) Recognized as Regulatory Assets of Liabilities |
| $ | 5 |
| $ | (119) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
(a) | After the derivatives are settled and the fuel is consumed, gains or losses are passed through the fuel cost-recovery clause. | |||||||||||||||||||
(b) | Amounts are recorded in regulatory assets and liabilities in the Condensed Balance Sheets until gains or losses are passed through the fuel cost-recovery clause. | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
68
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
DUKE ENERGY OHIO
The fair value amounts of derivative contracts, and the line items in the Condensed Consolidated Balance Sheets in which such amounts were included were as follows. The fair values of derivative contracts are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements where Duke Energy Ohio nets the fair value of derivative contracts subject to master netting arrangements with the same counterparty on the Condensed Consolidated Balance Sheets. Cash collateral associated with the derivative contracts were not netted against the fair value amounts.
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| June 30, 2013 |
| December 31, 2012 | |||||||||||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | ||||||||||||||||
Derivatives Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current assets: other | $ |
|
| $ | ― |
| $ | 2 |
| $ | ― | ||||||||||||
Total Derivatives Designated as Hedging Instruments |
| ― |
|
| ― |
|
| 2 |
|
| ― | ||||||||||||
Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current assets: other |
| 27 |
|
| 8 |
|
| 31 |
|
| 4 | ||||||||||||
Investments and other assets: other |
| 129 |
|
| 93 |
|
| 81 |
|
| 51 | ||||||||||||
Current liabilities: other |
| 152 |
|
| 173 |
|
| 106 |
|
| 132 | ||||||||||||
Deferred credits and other liabilities: other |
| 1 |
|
| 20 |
|
| ― |
|
| 4 | ||||||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current liabilities: other |
| ― |
|
| 1 |
|
| ― |
|
| 1 | ||||||||||||
Deferred credits and other liabilities: other |
| ― |
|
| 5 |
|
| ― |
|
| 7 | ||||||||||||
Total Derivatives Not Designated as Hedging Instruments |
| 309 |
|
| 300 |
|
| 218 |
|
| 199 | ||||||||||||
Total Derivatives | $ | 309 |
| $ | 300 |
| $ | 220 |
| $ | 199 | ||||||||||||
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on Duke Energy Ohio’s financial position. The amounts shown were calculated by counterparty.
Most derivatives are entered into with counterparties under enforceable master netting agreements, or with an ISO such as MISO or PJM. Derivatives entered into with a clearinghouse are usually over-collateralized due to the requirement to post initial margin upon entering into contracts. The amounts shown as offset are limited by the amount of exposure to a counterparty such that an over collateralized position at one counterparty is not allowed to reduce an under collateralized position at another counterparty. In addition to the amounts shown as offset in the table, Duke Energy Ohio may also have available accounts receivable or accounts payable to offset exposures in the event of bankruptcy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| ||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 178 |
| $ | 131 |
|
| $ | 180 |
| $ | 114 |
| ||||||||||||||||||||||||||||||||||
Gross amounts offset |
| (161) |
|
| (94) |
|
|
| (166) |
|
| (94) |
| ||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| 17 |
|
| 37 |
|
|
| 14 |
|
| 20 |
| ||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
| ― |
|
|
| 1 |
|
| 5 |
| ||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | 17 | (a) | $ | 37 | (b) |
| $ | 15 | (c) | $ | 25 | (d) | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
| December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| ||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 137 |
| $ | 81 |
|
| $ | 136 |
| $ | 55 |
| ||||||||||||||||||||||||||||||||||
Gross amounts offset |
| (110) |
|
| (51) |
|
|
| (125) |
|
| (51) |
| ||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| 27 |
|
| 30 |
|
|
| 11 |
|
| 4 |
| ||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| 2 |
|
| ― |
|
|
| 1 |
|
| 7 |
| ||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | 29 | (a) | $ | 30 | (b) |
| $ | 12 | (c) | $ | 11 | (d) | ||||||||||||||||||||||||||||||||||
|
|
|
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|
|
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|
|
|
| |||||||||||||||||||||||||||||||||
(a) | Included in Other within Current Assets on the Condensed Consolidated Balance Sheet. |
|
|
| |||||||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
(d) | Included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
|
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| |||||||||||||||||||||||||||||||||
69
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
There were no gains or losses on cash flow hedges recorded or reclassified at Duke Energy Ohio for the three and six months ended June 30, 2013 and 2012, and 2011, respectively. There were no hedge ineffectiveness during the six months ended June 30, 2012 and 2011, and no gains or losses have been excluded from the assessment of hedge effectiveness during the same periods for all Duke Energy Registrants.
Duke Energy. At June 30, 2012, $129 million of pre-tax deferred net losses on derivative instruments related to interest rate cash flow hedges remains in AOCI2013 and a $10 million pre-tax loss is expected to be recognized in earnings during the next 12 months as the hedged transactions occur.
Duke Energy Ohio. At June 30,December 31, 2012 there were no pre-taxpretax deferred net gains or losses on derivative instruments related to cash flow hedges remaining in AOCI.AOCI for Duke Energy Ohio.
The amounts of the pretax gains and losses recognized on undesignated contracts by type of derivative instrument, and the line items in the Condensed Consolidated Statements of Operations and Comprehensive Income in which such gains and losses were included or deferred on the Condensed Consolidated Balance Sheets as regulatory assets or liabilities were as follows.
| The following tables show the amount of the pre-tax gains and losses recognized on undesignated contracts by type of derivative | |||||||||||
instrument, and the line item(s) in the Condensed Consolidated Statements of Comprehensive Income in which such gains and losses are included or deferred on the Condensed Consolidated Balance Sheets as regulatory assets or liabilities. | ||||||||||||
| ||||||||||||
Undesignated Contracts—Location and Amount of Pre-Tax Gains and (Losses) Recognized in Income or as Regulatory Assets | ||||||||||||
or Liabilities | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Duke Energy |
| Duke Energy Ohio | ||||||||
|
| Three Months Ended June 30, | ||||||||||
(in millions) | 2012 |
| 2011 |
| 2012 |
| 2011 | |||||
Location of Pre-tax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
|
|
|
|
|
| |
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| |
Revenue, non-regulated electric, natural gas and other |
| ― |
|
| (12) |
|
| 4 |
|
| (16) | |
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |
Interest expense |
| ― |
|
| ― |
|
| (1) |
|
| (1) | |
Total Pre-tax (Losses) Gains Recognized in Earnings(a) | $ | ― |
| $ | (12) |
| $ | 3 |
| $ | (17) | |
Location of Pre-tax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
|
|
|
|
|
| |
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| |
Regulatory Asset | $ | 1 |
| $ | (1) |
| $ | ― |
| $ | ― | |
Regulatory Liability |
| 17 |
|
| 11 |
|
| ― |
|
| (1) | |
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |
Regulatory Asset |
| (32) |
|
| (21) |
|
| (1) |
|
| ― | |
Total Pre-tax Gains (Losses) Recognized as Regulatory Assets or Liabilities | $ | (14) |
| $ | (11) |
| $ | (1) |
| $ | (1) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Amounts include Duke Energy Ohio intercompany positions that are eliminated at Duke Energy. |
|
| Duke Energy |
| Duke Energy Ohio | ||||||||
|
| Six Months Ended June 30, | ||||||||||
(in millions) | 2012 |
| 2011 |
| 2012 |
| 2011 | |||||
Location of Pre-tax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
|
|
|
|
|
| |
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| |
Revenue, non-regulated electric, natural gas and other |
| 36 |
|
| (25) |
|
| 75 |
|
| (22) | |
Fuel used in electric generation and purchased power - non-regulated |
| ― |
|
| (1) |
|
| ― |
|
| (1) | |
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |
Interest expense |
| ― |
|
| ― |
|
| (1) |
|
| (1) | |
Total Pre-tax (Losses) Gains Recognized in Earnings(a) | $ | 36 |
| $ | (26) |
| $ | 74 |
| $ | (24) | |
Location of Pre-tax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
|
|
|
|
|
| |
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
| |
Regulatory Asset | $ | ― |
| $ | (1) |
| $ | (2) |
| $ | (1) | |
Regulatory Liability |
| 22 |
|
| 10 |
|
| 1 |
|
| ― | |
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |
Regulatory Asset |
| (10) |
|
| (9) |
|
| ― |
|
| ― | |
Total Pre-tax Gains (Losses) Recognized as Regulatory Assets of Liabilities | $ | 12 |
| $ | ― |
| $ | (1) |
| $ | (1) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Amounts include Duke Energy Ohio intercompany positions that are eliminated at Duke Energy. |
|
|
|
|
|
|
|
| |||||||
|
| Three Months Ended June 30, | ||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
| ||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||
Revenue, nonregulated electric, natural gas and other |
| $ | 78 |
| $ | 4 | ||||||||
Fuel used in electric generation and purchased power - nonregulated |
|
| (11) |
|
| ― | ||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||
Interest expense |
|
| (1) |
|
| (1) | ||||||||
Total Pretax (Losses) Gains Recognized in Earnings |
| $ | 66 |
| $ | 3 | ||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||
Regulatory asset |
| $ | ― |
| $ | ― | ||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||
Regulatory asset |
|
| 2 |
|
| (1) | ||||||||
Total Pretax Gains (Losses) Recognized as Regulatory Assets of Liabilities |
| $ | 2 |
| $ | (1) | ||||||||
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
| |||||||
|
| Six Months Ended June 30, | ||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||
Location of Pretax Gains and (Losses) Recognized in Earnings |
|
|
|
|
|
| ||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||
Revenue, nonregulated electric, natural gas and other |
| $ | (13) |
| $ | 75 | ||||||||
Fuel used in electric generation and purchased power - nonregulated |
|
| (18) |
|
| ― | ||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||
Interest expense |
|
| (1) |
|
| (1) | ||||||||
Total Pretax (Losses) Gains Recognized in Earnings |
| $ | (32) |
| $ | 74 | ||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||
Commodity contracts |
|
|
|
|
|
| ||||||||
Regulatory asset |
| $ | ― |
| $ | (2) | ||||||||
Regulatory liability |
|
|
|
|
| 1 | ||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||
Regulatory asset |
|
| 3 |
|
| ― | ||||||||
Total Pretax Gains (Losses) Recognized as Regulatory Assets of Liabilities |
| $ | 3 |
| $ | (1) | ||||||||
|
|
|
|
|
|
|
| |||||||
4870
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
DUKE ENERGY INDIANA
The fair value amounts of derivative contracts, and the line items in the Condensed Consolidated Balance Sheets in which such amounts were included were as follows. The fair values of derivative contracts are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements where Duke Energy Indiana nets the fair value of derivative contracts subject to master netting arrangements with the same counterparty on the Condensed Consolidated Balance Sheets. Cash associated with the derivative contracts were not netted against the fair value amounts.
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| June 30, 2013 |
| December 31, 2012 | ||||||||||||||||||||||||||||||
(in millions) | Asset |
| Liability |
| Asset |
| Liability | |||||||||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Commodity contracts(a) |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Current assets: other | $ | 18 |
| $ | ― |
| $ | 10 |
| $ | ― | |||||||||||||||||||||||
Current liabilities: other |
| ― |
|
| 2 |
|
| ― |
|
| ― | |||||||||||||||||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Current liabilities: other |
| ― |
|
| 35 |
|
| ― |
|
| 63 | |||||||||||||||||||||||
Total Derivatives Not Designated as Hedging Instruments |
| 18 |
|
| 37 |
|
| 10 |
|
| 63 | |||||||||||||||||||||||
Total Derivatives | $ | 18 |
| $ | 37 |
| $ | 10 |
| $ | 63 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(a) | Substantially all of these contracts receive regulatory treatment. | |||||||||||||||||||||||||||||||||
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on Duke Energy Indiana’s financial position. The amounts shown were calculated by counterparty.
Most derivatives are entered into with counterparties under enforceable master netting agreements. Derivatives entered into with a clearinghouse are usually over-collateralized due to the requirement to post initial margin upon entering into contracts. The amounts shown as offset are limited by the amount of exposure to a counterparty such that an over collateralized position at one counterparty is not allowed to reduce an under collateralized position at another counterparty. In addition to the amounts shown as offset in the table, Duke Energy Indiana may also have available accounts receivable or accounts payable to offset exposures in the event of bankruptcy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| ||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 18 |
| $ | ― |
|
| $ | 2 |
| $ | ― |
| ||||||||||||||||||||||||||||||||||
Gross amounts offset |
| ― |
|
| ― |
|
|
| (2) |
|
| ― |
| ||||||||||||||||||||||||||||||||||
Net amount subject to master netting |
| 18 |
|
| ― |
|
|
| ― |
|
| ― |
| ||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| ― |
|
|
|
|
|
| 35 |
|
|
|
| ||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | 18 | (a) | $ | ― |
|
| $ | 35 | (b) | $ | ― |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
| December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||
|
| Derivative Assets |
| Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | Current |
| Non-Current |
|
| Current |
| Non-Current |
| ||||||||||||||||||||||||||||||||||||||
Amounts not subject to master netting |
| 10 |
|
|
|
|
|
| 63 |
|
|
|
| ||||||||||||||||||||||||||||||||||
Net amounts recognized on the Condensed Consolidated Balance Sheet | $ | 10 | (a) | $ | ― |
|
| $ | 63 | (b) | $ | ― |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(a) | Included in Other within Current Assets on the Condensed Consolidated Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet. | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
Gains on cash flow hedges reclassified at Duke Energy Indiana for the three and six months ended June 30, 2013 and 2012 were not material.
Pretax deferred net gains or losses on derivative instruments related to cash flow hedges remaining in AOCI for Duke Energy Indiana were not material at June 30, 2013, and 2012, respectively.
The amounts of the pretax gains and losses recognized on undesignated contracts by type of derivative instrument and line items in the Condensed Consolidated Statements of Operations and Comprehensive Income in which such gains and losses were included or deferred on the Condensed Consolidated Balance Sheets as regulatory assets or liabilities were as follows.
|
|
|
|
|
|
|
| |||||||||||||
|
| Three Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||||||||
Commodity contracts(a) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
| $ | (2) |
| $ | 2 | ||||||||||||||
Regulatory liability |
|
| ― |
|
| 18 | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
|
| 20 |
|
| (30) | ||||||||||||||
Total Pretax Gains Recognized as Regulatory Assets of Liabilities |
| $ | 18 |
| $ | (10) | ||||||||||||||
|
|
|
|
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|
|
| |||||||||||||
|
|
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|
|
|
| |||||||||||||
|
| Six Months Ended June 30, | ||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities |
|
|
|
|
|
| ||||||||||||||
Commodity contracts(a) |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
| $ | (2) |
| $ | 2 | ||||||||||||||
Regulatory liability |
|
| 4 |
|
| 22 | ||||||||||||||
Interest rate contracts |
|
|
|
|
|
| ||||||||||||||
Regulatory asset |
|
| 28 |
|
| (9) | ||||||||||||||
Total Pretax Gains Recognized as Regulatory Assets of Liabilities |
| $ | 30 |
| $ | 15 | ||||||||||||||
|
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|
|
|
|
| |||||||||||||
(a) | Amounts in regulatory assets and liabilities related to terminated hedges are reclassified to earnings as the interest expense is recorded. The hedges will be amortized to interest expense over the term of the related debt. | |||||||||||||||||||
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71
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Credit RiskCombined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
CREDIT RISK
Certain derivative contracts of the Duke Energy and Duke Energy Ohio’s derivative contractsRegistrants contain contingent credit features, such as material adverse change clauses or payment acceleration clauses that could result in immediate payments, the posting of letters of credit or the termination of the derivative contract before maturity if specific events occur, such as a downgrade of Duke Energy or Duke Energy Ohio’s credit rating downgrade below investment grade.
The following table showstables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk related payment provisions. The amounts disclosed in the table below represent the aggregate fair value amounts of such derivative instruments at the end of the reporting period, the aggregate fair value of assets that are already posted as collateral under such derivative instruments at the end of the reporting period, and the aggregate fair value of additional assets that would be required to be transferred in the event that credit-risk-related contingent features were triggered.
Information Regarding Derivative Instruments that Contain Credit-risk Related Contingent Features | |||||||
|
|
|
|
|
|
|
|
|
|
| Duke Energy |
| Duke Energy Ohio | ||
(in millions) |
| June 30, 2012 | |||||
Aggregate Fair Value Amounts of Derivative Instruments in a Net Liability Position |
| $ | 193 |
| $ | 189 | |
Collateral Already Posted |
| $ | 67 |
| $ | 44 | |
Additional Cash Collateral or Letters of Credit in the Event Credit-risk-related Contingent Features were Triggered at the End of the Reporting Period |
| $ | 6 |
| $ | 4 | |
|
|
|
|
|
|
|
|
(in millions) |
| December 31, 2011 | |||||
Aggregate Fair Value Amounts of Derivative Instruments in a Net Liability Position |
| $ | 96 |
| $ | 94 | |
Collateral Already Posted |
| $ | 36 |
| $ | 35 | |
Additional Cash Collateral or Letters of Credit in the Event Credit-risk-related Contingent Features were Triggered at the End of the Reporting Period |
| $ | 5 |
| $ | 5 |
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
|
| June 30, 2013 | |||||||||||||||||||||||||||||||
(in millions) |
| Duke Energy |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio | ||||||||||||||||||||||||
Aggregate fair value amounts of derivative instruments in a net liability position |
| $ | 532 |
| $ | 261 |
| $ | 97 |
| $ | 164 |
| $ | 268 | |||||||||||||||||||
Fair value of collateral already posted |
|
| 158 |
|
| 32 |
|
| 4 |
|
| 28 |
|
| 126 | |||||||||||||||||||
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered at the end of the reporting period |
|
| 246 |
|
| 229 |
|
| 93 |
|
| 136 |
|
| 17 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
|
| December 31, 2012 | |||||||||||||||||||||||||||||||
(in millions) |
| Duke Energy |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio | ||||||||||||||||||||||||
Aggregate fair value amounts of derivative instruments in a net liability position |
| $ | 466 |
| $ | 286 |
| $ | 108 |
| $ | 178 |
| $ | 176 | |||||||||||||||||||
Fair value of collateral already posted |
|
| 163 |
|
| 59 |
|
| 9 |
|
| 50 |
|
| 104 | |||||||||||||||||||
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered at the end of the reporting period |
|
| 230 |
|
| 227 |
|
| 99 |
|
| 128 |
|
| 2 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Netting of Cash Collateral and Derivative Assets and Liabilities Under Master Netting Arrangements. In accordance with applicable accounting rules,guidance, the Duke Energy and Duke Energy OhioRegistrants have elected to offset fair value amounts (or amounts that approximate fair value) recognized on their Condensed Consolidated Balance Sheets related to cash collateral amounts receivable or payable against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting agreement. The amounts disclosed in the table below represent the receivables related to the right to reclaim cash collateral and payables related to the obligation to return cash collateral under master netting arrangements. See Note 910 for additional information on fair value disclosures related to derivatives.
Information Regarding Cash Collateral under Master Netting Arrangements | |||||||||||||||||||||||||||||||||||
|
|
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|
|
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|
|
|
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|
|
| |||||||||||||||||||||||
|
| Duke Energy |
| Duke Energy Ohio |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
| June 30, 2012 |
|
| June 30, 2013 |
| December 31, 2012 | ||||||||||||||||||||||||||||
(in millions) | (in millions) | Receivables |
| Payable |
| Receivables |
| Payable | (in millions) | Receivables |
| Payables |
| Receivables |
| Payables | |||||||||||||||||||
Duke Energy | Duke Energy |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Amounts offset against net derivative positions | Amounts offset against net derivative positions | $ | 39 |
| $ | ― |
| $ | 73 |
| $ | ― | |||||||||||||||||||||||
Amounts not offset against net derivative positions | Amounts not offset against net derivative positions |
| 129 |
|
| ― |
|
| 93 |
|
| ― | |||||||||||||||||||||||
Progress Energy | Progress Energy |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Amounts offset against net derivative positions | Amounts offset against net derivative positions |
| 32 |
|
| ― |
|
| 58 |
|
| ― | |||||||||||||||||||||||
Amounts not offset against net derivative positions | Amounts not offset against net derivative positions |
| ― |
|
| ― |
|
| 1 |
|
| ― | |||||||||||||||||||||||
Duke Energy Progress | Duke Energy Progress |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Amounts offset against net derivative positions | Amounts offset against net derivative positions |
| 4 |
|
| ― |
|
| 9 |
|
| ― | |||||||||||||||||||||||
Amounts not offset against net derivative positions | Amounts not offset against net derivative positions |
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||
Duke Energy Florida | Duke Energy Florida |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Amounts offset against net derivative positions | Amounts offset against net derivative positions |
| 28 |
|
| ― |
|
| 49 |
|
| ― | |||||||||||||||||||||||
Amounts not offset against net derivative positions | Amounts not offset against net derivative positions |
| ― |
|
| ― |
|
| 1 |
|
| ― | |||||||||||||||||||||||
Duke Energy Ohio | Duke Energy Ohio |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Amounts offset against net derivative positions | Amounts offset against net derivative positions |
| 5 |
|
| ― |
|
| 15 |
|
| ― | |||||||||||||||||||||||
Amounts not offset against net derivative positions | Amounts not offset against net derivative positions |
| 120 |
|
| ― |
|
| 92 |
|
| ― | |||||||||||||||||||||||
Duke Energy Indiana | Duke Energy Indiana |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Amounts offset against net derivative positions | Amounts offset against net derivative positions | $ | ― |
| $ | 1 |
| $ | ― |
| $ | ― | Amounts offset against net derivative positions |
| 2 |
|
| ― |
|
| ― |
|
| ― | |||||||||||
Amounts not offset against net derivative positions | Amounts not offset against net derivative positions | $ | 73 |
| $ | ― |
| $ | 49 |
| $ | ― | Amounts not offset against net derivative positions |
| 9 |
|
| ― |
|
| ― |
|
| ― | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| December 31, 2011 | |||||||||||||||||||||||||||||||||
(in millions) | Receivables |
| Payable |
| Receivables |
| Payable | ||||||||||||||||||||||||||||
Amounts offset against net derivative positions | $ | 10 |
| $ | ― |
| $ | 9 |
| $ | ― | ||||||||||||||||||||||||
Amounts not offset against net derivative positions | $ | 30 |
| $ | ― |
| $ | 28 |
| $ | ― |
9. Fair Value of Financial Assets and Liabilities72
Under existing accounting guidance, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. The fair value definition focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability versus an entry price, which would be the price paid to acquire an asset or received to assume a liability.
49
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
The Duke Energy Registrants classify recurring and non-recurring fair value measurements based on the following fair value hierarchy, as prescribed by the accounting guidance for fair value, which prioritizes the inputs to valuation techniques used to measure fair value into three levels:
Level 1—unadjusted quoted prices in active markets for identical assets or liabilities that Duke Energy has the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information. Duke Energy does not adjust quoted market prices on Level 1 for any blockage factor.
Level 2—a fair value measurement utilizing inputs other than a quoted market price that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates. A Level 2 measurement cannot have more than an insignificant portion of the valuation based on unobservable inputs.
Level 3—any fair value measurements which include unobservable inputs for the asset or liability for more than an insignificant portion of the valuation. A level 3 measurement may be based primarily on Level 2 inputs.
The fair value accounting guidance for financial instruments permits entities to elect to measure many financial instruments and certain other items at fair value that are not required to be accounted for at fair value under other GAAP. There are no financial assets or financial liabilities that are not required to be accounted for at fair value under GAAP for which the option to record at fair value has been elected by the Duke Energy Registrants. However, in the future, the Duke Energy Registrants may elect to measure certain financial instruments at fair value in accordance with this accounting guidance.
The Duke Energy Registrant’s Policy for the recognition of transfers between levels of the fair value hierarchy is to recognize the transfer at the end of the period.
Valuation methods of the primary fair value measurements disclosed below are as follows:
Investments in equity securities. Investments in equity securities, other than those accounted for as equity and cost method investments, are typically valued at the closing price in the principal active market as of the last business day of the quarter. Principal active markets for equity prices include published exchanges such as NASDAQ and NYSE. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. Prices have not been adjusted to reflect for after-hours market activity. The majority of investments in equity securities are valued using Level 1 measurements.
Investments in available-for-sale auction rate securities. Duke Energy holds auction rate securities for which an active market does not currently exist. During the three and six months ended June 30, 2012, $39 million of these investments in auction rate securities were redeemed at full par value plus accrued interest. Auction rate securities held are student loan securities for which approximately 90% is ultimately backed by the U.S. government. Approximately 25% of these securities are AAA rated. As of June 30, 2012 and December 31, 2011 all of these auction rate securities are classified as long-term investments and are valued using Level 3 measurements. The methods and significant assumptions used to determine the fair values of the investment in auction rate debt securities represent estimations of fair value using internal discounted cash flow models which incorporate primarily management’s own assumptions as to the term over which such investments will be recovered at par (ranging from zero to 17 years), the current level of interest rates (less than 0.5%), and the appropriate risk-adjusted discount rates (up to 5.3% reflecting a tenor of up to 17 years). In preparing the valuations, all significant value drivers were considered, including the underlying collateral (primarily evaluated on the basis of credit ratings, parity ratios and the percentage of loans backed by the U.S. government). Auction rate securities which are classified as Short-term investments are valued using Level 2 measurements, as they are valued at par based on a commitment by the issuer to redeem at par value. There were no auction rate securities classified as Short-term investments as of June 30, 2012 or December 31, 2011.
There were no other-than-temporary impairments associated with investments in auction rate debt securities during the three months ended and six months ended June 30, 2012 or 2011.
Investments in debt securities. Most debt investments (including those held in the Nuclear Decommissioning Trust Funds (NDTF)) are valued based on a calculation using interest rate curves and credit spreads applied to the terms of the debt instrument (maturity and coupon interest rate) and consider the counterparty credit rating. Most debt valuations are Level 2 measurements. If the market for a particular fixed income security is relatively inactive or illiquid, the measurement is a Level 3 measurement. U.S. Treasury debt is typically a Level 1 measurement. For certain investments that are valued on a net asset value per share (or its equivalent), or the net asset value basis, when Duke Energy does not have the ability to redeem the investment in the near term at net asset value per share (or its equivalent), or the net asset value is not available as of the measurement date, the fair value measurement of the investment is categorized as Level 3.
Commodity derivatives. The pricing for commodity derivatives is primarily a calculated value which incorporates the forward price and is adjusted for liquidity (bid-ask spread), credit or non-performance risk (after reflecting credit enhancements such as collateral) and discounted to present value. The primary difference between a Level 2 and a Level 3 measurement has to do with the level of activity in forward markets for the commodity. If the market is relatively inactive, the measurement is deemed to be a Level 3 measurement. Commodity derivatives with clearinghouses are classified as Level 1 measurements.
50
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)(Unaudited)
Duke Energy | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy's Condensed | ||||||||||||
Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 10 for additional information related to investments by major security type. | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair Value Amounts at |
|
|
|
| �� |
|
|
|
| |
(in millions) |
| June 30, 2012 |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Investments in available-for-sale auction rate securities(a) |
| $ | 41 |
| $ | ― |
| $ | ― |
| $ | 41 | |
Nuclear decommissioning trust fund equity securities |
|
| 1,470 |
|
| 1,406 |
|
| 46 |
|
| 18 | |
Nuclear decommissioning trust fund debt securities |
|
| 734 |
|
| 78 |
|
| 610 |
|
| 46 | |
Other long-term trading and available-for-sale equity securities(b) |
|
| 74 |
|
| 66 |
|
| 8 |
|
| ― | |
Other trading and available-for-sale debt securities(c) |
|
| 481 |
|
| 28 |
|
| 453 |
|
| ― | |
Derivative assets(b) |
|
| 89 |
|
| 16 |
|
| 9 |
|
| 64 | |
| Total Assets |
|
| 2,889 |
|
| 1,594 |
|
| 1,126 |
|
| 169 |
Derivative liabilities(d) |
|
| (298) |
|
| (12) |
|
| (203) |
|
| (83) | |
| Net Assets |
| $ | 2,591 |
| $ | 1,582 |
| $ | 923 |
| $ | 86 |
|
|
| Total Fair Value Amounts at |
|
|
|
|
|
|
|
|
| |
(in millions) |
| December 31, 2011 |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Investments in available-for-sale auction rate securities(a) |
| $ | 71 |
| $ | ― |
| $ | ― |
| $ | 71 | |
Nuclear decommissioning trust fund equity securities |
|
| 1,337 |
|
| 1,285 |
|
| 46 |
|
| 6 | |
Nuclear decommissioning trust fund debt securities |
|
| 723 |
|
| 109 |
|
| 567 |
|
| 47 | |
Other long-term trading and available-for-sale equity securities(b) |
|
| 68 |
|
| 61 |
|
| 7 |
|
| ― | |
Other trading and available-for-sale debt securities(c) |
|
| 382 |
|
| 22 |
|
| 360 |
|
| ― | |
Derivative assets(b) |
|
| 74 |
|
| 43 |
|
| 6 |
|
| 25 | |
| Total Assets |
|
| 2,655 |
|
| 1,520 |
|
| 986 |
|
| 149 |
Derivative liabilities(d) |
|
| (264) |
|
| (36) |
|
| (164) |
|
| (64) | |
| Net Assets |
| $ | 2,391 |
| $ | 1,484 |
| $ | 822 |
| $ | 85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||
(b) | Included in Other within Current Assets and Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet. | ||||||||||||
(c) | Included in Other within Investments and Other Assets and Short-term Investments on the Condensed Consolidated Balance Sheets. | ||||||||||||
(d) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets. |
| The following tables provide a reconciliation of beginning and ending balances of assets and liabilities measured at fair value on a | ||||||||||||
recurring basis where the determination of fair value includes significant unobservable inputs (Level 3): | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | ||||||
Three Months Ended June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
| ||
Balance at March 31, 2012 | $ | 72 |
| $ | 56 |
| $ | (42) |
| $ | 86 | ||
| Total pre-tax realized or unrealized losses included in earnings: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Regulated electric |
| ― |
|
| ― |
|
| 17 |
|
| 17 |
|
| Revenue, non-regulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (1) |
|
| (1) |
| Total pre-tax gains included in other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Gains on available for sale securities and other |
| 8 |
|
| ― |
|
| ― |
|
| 8 |
| Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Purchases |
| ― |
|
| 7 |
|
| 22 |
|
| 29 |
|
| Settlements |
| (39) |
|
| ― |
|
| (15) |
|
| (54) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 1 |
|
| ― |
|
| 1 | |
Balance at June 30, 2012 | $ | 41 |
| $ | 64 |
| $ | (19) |
| $ | 86 | ||
Three Months Ended June 30, 2011 |
|
|
|
|
|
|
|
|
|
|
| ||
Balance at March 31, 2011 | $ | 122 |
| $ | 48 |
| $ | (24) |
| $ | 146 | ||
| Total pre-tax realized or unrealized gains (losses) included in earnings: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Revenue, non-regulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (11) |
|
| (11) |
| Total pre-tax losses included in other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Losses on available for sale securities and other |
| (1) |
|
| ― |
|
| ― |
|
| (1) |
| Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Purchases |
| ― |
|
| 6 |
| �� | ― |
|
| 6 |
|
| Sales |
| ― |
|
| (1) |
|
| ― |
|
| (1) |
|
| Settlements |
| (22) |
|
| ― |
|
| (6) |
|
| (28) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| ― |
|
| 19 |
|
| 19 | |
| Transfers out of Level 3 |
| (9) |
|
| ― |
|
| ― |
|
| (9) | |
Balance at June 30, 2011 | $ | 90 |
| $ | 53 |
| $ | (22) |
| $ | 121 |
51
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
9. Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | ||||||
Six Months Ended June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
| ||
Balance at December 31, 2011 | $ | 71 |
| $ | 53 |
| $ | (39) |
| $ | 85 | ||
| Total pre-tax realized or unrealized losses included in earnings: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Regulated electric |
| ― |
|
| ― |
|
| 25 |
|
| 25 |
|
| Revenue, non-regulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (3) |
|
| (3) |
| Total pre-tax gains included in other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Gains on available for sale securities and other |
| 9 |
|
| ― |
|
| ― |
|
| 9 |
| Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Purchases |
| ― |
|
| 9 |
|
| 22 |
|
| 31 |
|
| Settlements |
| (39) |
|
| ― |
|
| (24) |
|
| (63) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 2 |
|
| ― |
|
| 2 | |
Balance at June 30, 2012 | $ | 41 |
| $ | 64 |
| $ | (19) |
| $ | 86 | ||
Pre-tax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding at June 30, 2012 |
|
|
|
|
|
|
|
|
|
| |||
|
| Revenue, non-regulated electric, natural gas, and other | ― |
|
| ― |
|
| 3 |
|
| 3 | |
Total | $ | ― |
| $ | ― |
| $ | 3 |
| $ | 3 | ||
Six Months Ended June 30, 2011 |
|
|
|
|
|
|
|
|
|
|
| ||
Balance at December 31, 2010 | $ | 118 |
| $ | 47 |
| $ | (19) |
| $ | 146 | ||
| Total pre-tax realized or unrealized gains (losses) included in earnings: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Revenue, non-regulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (19) |
|
| (19) |
| Total pre-tax gains included in other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Gains on available for sale securities and other |
| 5 |
|
| ― |
|
| ― |
|
| 5 |
| Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| |
|
| Purchases |
| ― |
|
| 7 |
|
| ― |
|
| 7 |
|
| Sales |
| ― |
|
| (3) |
|
| ― |
|
| (3) |
|
| Settlements |
| (24) |
|
| ― |
|
| (3) |
|
| (27) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 2 |
|
| 19 |
|
| 21 | |
| Transfers out of Level 3 |
| (9) |
|
| ― |
|
| ― |
|
| (9) | |
Balance at June 30, 2011 | $ | 90 |
| $ | 53 |
| $ | (22) |
| $ | 121 | ||
Pre-tax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding at June 30, 2012 |
|
|
|
|
|
|
|
|
|
| |||
|
| Revenue, non-regulated electric, natural gas, and other | ― |
|
| ― |
|
| (10) |
|
| (10) | |
Total | $ | ― |
| $ | ― |
| $ | (10) |
| $ | (10) |
52
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
Duke Energy Carolinas | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy Carolinas’ | ||||||||||||
Condensed Consolidated Balance Sheets at fair value. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 10 for additional information related to investments by major security type. | |||||||||||||
| |||||||||||||
|
|
|
| Total Fair Value Amounts at |
|
|
|
|
|
|
|
|
|
(in millions) | June 30, 2012 |
| Level 1 |
| Level 2 |
| Level 3 | ||||||
Investments in available-for-sale auction rate securities(a) |
| $ | 6 |
| $ | ― |
| $ | ― |
| $ | 6 | |
Nuclear decommissioning trust fund equity securities |
|
| 1,470 |
|
| 1,406 |
|
| 46 |
|
| 18 | |
Nuclear decommissioning trust fund debt securities |
|
| 734 |
|
| 78 |
|
| 610 |
|
| 46 | |
Derivative assets(b) |
|
| 1 |
|
| ― |
|
| 1 |
|
| ― | |
| Total Assets |
| $ | 2,211 |
| $ | 1,484 |
| $ | 657 |
| $ | 70 |
|
|
| Total Fair Value Amounts at |
|
|
|
|
|
|
|
|
| |
(in millions) |
| December 31, 2011 |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Investments in available-for-sale auction rate securities(a) |
| $ | 12 |
| $ | ― |
| $ | ― |
| $ | 12 | |
Nuclear decommissioning trust fund equity securities |
|
| 1,337 |
|
| 1,285 |
|
| 46 |
|
| 6 | |
Nuclear decommissioning trust fund debt securities |
|
| 723 |
|
| 109 |
|
| 567 |
|
| 47 | |
Derivative assets(b) |
|
| 1 |
|
| ― |
|
| 1 |
|
| ― | |
| Total Assets |
| $ | 2,073 |
| $ | 1,394 |
| $ | 614 |
| $ | 65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||
(b) | Included in Other within Current Assets and Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. |
| The following tables provide a reconciliation of beginning and ending balances of assets and liabilities measured at fair value | |||||||||
on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3): | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Total | |||||
Three Months Ended June 30, 2012 |
|
|
|
|
|
|
|
| ||
Balance at March 31, 2012 | $ | 12 |
| $ | 56 |
| $ | 68 | ||
| Total pre-tax gains included in other comprehensive income: |
|
|
|
|
|
|
|
| |
|
| Gains on available for sale securities and other |
| 2 |
|
| ― |
|
| 2 |
| Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
| |
|
| Purchases |
| ― |
|
| 7 |
|
| 7 |
|
| Settlements |
| (8) |
|
| ― |
|
| (8) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 1 |
|
| 1 | |
Balance at June 30, 2012 |
| 6 |
| $ | 64 |
| $ | 70 | ||
Three Months Ended June 30, 2011 |
|
|
|
|
|
|
|
| ||
Balance at March 31, 2011 | $ | 12 |
| $ | 48 |
| $ | 60 | ||
| Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
| |
|
| Purchases |
| ― |
|
| 6 |
|
| 6 |
|
| Sales |
| ― |
|
| (1) |
|
| (1) |
Balance at June 30, 2011 | $ | 12 |
| $ | 53 |
| $ | 65 |
53
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
|
|
| Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Total | |||
Six Months Ended June 30, 2012 |
|
|
|
|
|
|
|
| ||
Balance at December 31, 2011 | $ | 12 |
| $ | 53 |
| $ | 65 | ||
| Total pre-tax gains included in other comprehensive income: |
|
|
|
|
|
|
|
| |
|
| Gains on available for sale securities and other |
| 2 |
|
| ― |
|
| 2 |
| Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
| |
|
| Purchases |
| ― |
|
| 9 |
|
| 9 |
|
| Settlements |
| (8) |
|
| ― |
|
| (8) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 2 |
|
| 2 | |
Balance at June 30, 2012 | $ | 6 |
| $ | 64 |
| $ | 70 | ||
Six Months Ended June 30, 2011 |
|
|
|
|
|
|
|
| ||
Balance at December 31, 2010 | $ | 12 |
| $ | 47 |
| $ | 59 | ||
| Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
| |
|
| Purchases |
| ― |
|
| 7 |
|
| 7 |
|
| Sales |
| ― |
|
| (3) |
|
| (3) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 2 |
|
| 2 | |
Balance at June 30, 2011 | $ | 12 |
| $ | 53 |
| $ | 65 |
Duke Energy Ohio | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy Ohio’s | ||||||||||||
Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair Value Amounts at |
|
|
|
|
|
|
|
|
| |
(in millions) |
| June 30, 2012 |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Derivative assets(a) |
| $ | 74 |
| $ | 62 |
| $ | 4 |
| $ | 8 | |
Derivative liabilities(b) |
|
| (30) |
|
| (11) |
|
| (9) |
|
| (10) | |
| Net Assets (Liabilities) |
| $ | 44 |
| $ | 51 |
| $ | (5) |
| $ | (2) |
|
|
| Total Fair Value Amounts at |
|
|
|
|
|
|
|
|
| |
(in millions) |
| December 31, 2011 |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Derivative assets(a) |
| $ | 56 |
| $ | 42 |
| $ | 5 |
| $ | 9 | |
Derivative liabilities(b) |
|
| (30) |
|
| (10) |
|
| (8) |
|
| (12) | |
| Net Assets (Liabilities) |
| $ | 26 |
| $ | 32 |
| $ | (3) |
| $ | (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Included in Other within Current Assets and Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||
(b) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets. |
| |||||
| |||||
|
| ||||
| |||||
|
|
| |||
| |||||
|
| ||||
| |||||
|
| ||||
|
| ||||
|
|
| |||
|
| ||||
|
|
| |||
| |||||
|
| ||||
|
|
|
54
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
|
| ||||
| |||||
|
|
| |||
| |||||
|
| ||||
| |||||
|
| ||||
|
| ||||
|
|
| |||
| |||||
|
|
| |||
|
|
| |||
| |||||
|
|
| |||
| |||||
|
| ||||
| |||||
|
| ||||
|
| ||||
|
|
| |||
| |||||
|
|
| |||
|
|
|
Duke Energy Indiana | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy Indiana’s | |||||||||||||
Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 10 for additional information related to investments by major security type. | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair Value Amounts at |
|
|
|
|
|
|
|
|
| |
(in millions) |
| June 30, 2012 |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Available-for-sale equity securities(a) |
| $ | 46 |
| $ | 46 |
| $ | ― |
| $ | ― | |
Available-for-sale debt securities(a) |
|
| 29 |
|
| ― |
|
| 29 |
|
| ― | |
Derivative assets(b) |
|
| 23 |
|
| 1 |
|
| ― |
|
| 22 | |
| Total Assets |
|
| 98 |
|
| 47 |
|
| 29 |
| $ | 22 |
Derivative liabilities(c) |
|
| (76) |
|
| ― |
|
| (76) |
|
| ― | |
| Net Assets (Liabilities) |
| $ | 22 |
| $ | 47 |
| $ | (47) |
| $ | 22 |
|
|
| Total Fair Value Amounts at |
|
|
|
|
|
|
|
|
| |
(in millions) |
| December 31, 2011 |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Available-for-sale equity securities(a) |
| $ | 46 |
| $ | 46 |
| $ | ― |
| $ | ― | |
Available-for-sale debt securities(a) |
|
| 28 |
|
| ― |
|
| 28 |
|
| ― | |
Derivative assets(b) |
|
| 4 |
|
| ― |
|
| ― |
|
| 4 | |
| Total Assets |
|
| 78 |
|
| 46 |
|
| 28 |
| $ | 4 |
Derivative liabilities(c) |
|
| (69) |
|
| (1) |
|
| (68) |
|
| ― | |
| Net Assets (Liabilities) |
| $ | 9 |
| $ | 45 |
| $ | (40) |
| $ | 4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||
(b) | Included in Other within Current Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||
(c) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets. |
55
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
| |||||
| |||||
| |||||
|
| ||||
| |||||
|
|
| |||
| |||||
|
| ||||
| |||||
|
| ||||
|
| ||||
|
|
| |||
| |||||
|
|
| |||
| |||||
|
| ||||
|
| ||||
|
|
|
| |||||
|
| ||||
| |||||
|
|
| |||
| |||||
|
| ||||
| |||||
|
| ||||
|
| ||||
|
| ||||
|
|
| |||
| |||||
|
|
| |||
| |||||
|
| ||||
|
| ||||
|
|
|
Additional Fair Value Disclosures—Long-term debt, including current maturities: | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of long-term debt is summarized in the following table. Judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates determined are not necessarily indicative of the amounts the Duke Energy Registrants could have settled in current markets. The fair value of the long-term debt is determined using Level 2 measurements. | ||||||||||||||
| ||||||||||||||
|
|
|
| As of June 30, 2012 |
| As of December 31, 2011 | ||||||||
(in millions) | Book Value |
| Fair Value |
| Book Value |
| Fair Value | |||||||
Duke Energy (a) | $ | 20,324 |
| $ | 23,028 |
| $ | 20,573 |
| $ | 23,053 | |||
Duke Energy Carolinas(b) | $ | 8,522 |
| $ | 9,996 |
| $ | 9,274 |
| $ | 10,629 | |||
Duke Energy Ohio | $ | 2,551 |
| $ | 2,684 |
| $ | 2,555 |
| $ | 2,688 | |||
Duke Energy Indiana | $ | 3,707 |
| $ | 4,346 |
| $ | 3,459 |
| $ | 4,048 | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Includes book value of Non-recourse long-term debt of variable interest entities of $915 million and $949 million June 30, 2012 and December 31, 2011, respectively. | |||||||||||||
(b) | Includes book value of Non-recourse long-term debt of variable interest entities of $300 million at both June 30, 2012 and December 31, 2011, respectively. |
56
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
At both June 30, 2012 and December 31, 2011, the fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper and non-recourse notes payable of variable interest entities are not materially different from their carrying amounts because of the short-term nature of these instruments and/or because the stated rates approximate market rates.
10. Investments in Debt and Equity Securities
The Duke Energy Registrants classify their investments in debt and equity securities into two categories – trading and available-for-sale.
Investments in debt and equity securities are classified as either short-term investments or long-term investments based on management’s intent and ability to sell these securities, taking into consideration illiquidity factors in the current markets.
Trading Securities.TRADING SECURITIES
Investments in debt and equity securities held in grantor trusts associated with certain deferred compensation plans and certain other investments are classified as trading securities and are reported at fair value in the Condensed Consolidated Balance Sheets with net realized and unrealized gains and losses included in earnings each period. At June 30, 20122013 and December 31, 2011,2012, the fair value of these investments was $31$19 million and $32$33 million, respectively.
Available for Sale Securities.AVAILABLE FOR SALE SECURITIES
All other investments in debt and equity securities are classified as available-for-sale securities, which are also reported at fair value on the Condensed Consolidated Balance Sheets with unrealized gains and losses excluded from earnings and reported either as a regulatory asset or liability, as discussed further below, or as a component of other comprehensive income (OCI) until realized.
Duke Energy’s available-for-sale securities are primarily comprised of investments held in the (i) NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) investments in a grantor trusttrusts at both Duke Energy Indiana and Duke Energy Florida related to other post-retirement benefitOPEB plans as required by the IURC and FERC, respectively, and at Duke Energy Progress, (iii) Duke Energy captive insurance investment portfolio, (iv) Duke Energy’s foreign operations investment portfolio and (v) investments of Duke Energy and Duke Energy Carolinas in auction rate debt securities.
Duke Energy holds corporate debt securities which were purchased using excess cash from its foreign operations. These investments are classified as Short-term investments on the Condensed Consolidated Balance Sheet and are available for current operations of Duke Energy’s foreign business. The fair value of these investments was $280 million as of June 30, 2013 and $333 million as of December 31, 2012.
Duke Energy classifies all other investments in debt and equity securities as long-term, unless otherwise noted.
NDTF and Grantor Trust
The investments within the NDTF at Duke Energy Carolinas, NDTFDuke Energy Progress, Duke Energy Florida and the Duke Energy Indiana, Duke Energy Progress and Duke Energy Florida grantor trusttrusts (Investment Trusts) are managed by independent investment managers with discretion to buy, sell and invest pursuant to the objectives set forth by the trust agreements. Therefore, the Duke Energy Carolinas and Duke Energy IndianaRegistrants have limited oversight of the day-to-day management of these investments. Since day-to-day investment decisions, including buy and sell decisions, are made by the investment manager, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Carolinas and Duke Energy Indiana.Registrants. Accordingly, all unrealized gains and losses associated with debt and equity securities within the Duke Energy Carolinas NDTF and the Duke Energy Indiana grantor trustInvestment Trusts are considered other-than-temporary and are recognized immediately when the fair value of individual investments is less than the cost basis of the investment. Pursuant to regulatory accounting, substantially all unrealized gains and losses associated with investments in debt and equity securities within the Duke Energy Carolinas NDTF and the Duke Energy Indiana grantor trustInvestment Trusts are deferred as a regulatory asset or liability. As a result, there is no immediate impact on the earnings of the Duke Energy Carolinas and Duke Energy Indiana.Registrants.
Other Available for Sale Securities
For investments in debt and equity securities held in the captive insurance investment portfolio, Duke Energy’sthe foreign operations investment portfolio and investments in auction rate debt securities, unrealized gains and losses are included in other comprehensive income until realized, unless it is determined that the carrying value of an investment is other-than-temporarily impaired. If so, the write-down to fair value may be included in earnings based on the criteria discussed below.
For available-for-sale securities outside offor which other-than-temporary-impairments are required, the Duke Energy Carolinas NDTF and the Duke Energy Indiana grantor trust, which are discussed separately above, Duke Energy analyzesRegistrants analyze all investment holdings each reporting period to determine whether a decline in fair value should be considered other-than-temporary. Criteria used to evaluate whether an impairment associated with equity securities is other-than-temporary includes, but is not limited to, the length of time over which the market value has been lower than the cost basis of the investment, the percentage decline compared to the cost of the investment and management’s intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. If a decline in fair value is determined to be other-than-temporary, the investment is written down to its fair value through a charge to earnings.
74
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
With respect to investments in debt securities, under the accounting guidance for other-than-temporary impairment, if the entity does not have an intent to sell the security and it is not more likely than not that management will be required to sell the debt security before the recovery of its cost basis, the impairment write-down to fair value would be recorded as a component of other comprehensive income, except for when it is determined that a credit loss exists. In determining whether a credit loss exists, management considers, among other things, the length of time and the extent to which the fair value has been less than the amortized cost basis, changes in the financial condition of the issuer of the security, or in the case of an asset backed security, the financial condition of the underlying loan obligors, consideration of underlying collateral and guarantees of amounts by government entities, ability of the issuer of the security to make scheduled interest or principal payments and any changes to the rating of the security by rating agencies. If it is determined that a credit loss exists, the amount of impairment write-down to fair value would be split between the credit loss, which would be recognized in earnings, and the amount attributable to all other factors, which would be recognized in other comprehensive income. Management believes, based on consideration of the criteria above, that no credit loss exists as of June 30, 20122013 and December 31, 2011.2012. Management does not have the intent to sell such investments in auction rate debt securities and the investments in debt securities within its captive insurance investment portfolio and foreign operations investment portfolio, and it is not more likely than not that management will be required to sell these securities before the anticipated recovery of their cost basis. Management has concluded that there were no other-than-temporary impairments for debt or equity securities necessary as of June 30, 20122013 and December 31, 2011.2012. Accordingly, all changes in the market value of investments other than those held in the Duke Energy Carolinas NDTF and the Duke Energy Indiana Grantor TrustInvestment Trusts, which receive regulatory accounting as discussed above, were reflected as a component of other comprehensive income in 20122013 and 2011.2012.
57
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
See Note 910 for additional information related to fair value measurements for investments in auction rate debt securities.
Short-term and Long-term investments. Investments in debt and equity securities are classified as either short-term investments or long-term investments based on management’s intent and ability to sell these securities, taking into consideration illiquidity factors in the current markets.
Duke Energy holds corporate debt securities which were purchased using excess cash from its foreign operations. These investments are classified as Short-term Investments on the balance sheet and are available for current operations of Duke Energy’s foreign business. Duke Energy held short-term investments with a fair value of $234 million as of June 30, 2012 and $190 million as of December 31, 2011.
Duke Energy classifies its investments in debt and equity securities held in the Duke Energy Carolinas NDTF (see Note 9 for further information), the Duke Energy Indiana grantor trust and the captive insurance investment portfolio as long-term. Additionally, Duke Energy has classified $41 million carrying value ($50 million par value) and $71 million carrying value ($89 million par value) of investments in auction rate debt securities as long-term at June 30, 2012 and December 31, 2011, respectively, due to market illiquidity factors as a result of continued failed auctions. All of these investments are classified as available-for-sale and, therefore, are reflected on the Condensed Consolidated Balance Sheets at estimated fair value based on either quoted market prices or management’s best estimate of fair value based on expected future cash flow using appropriate risk-adjusted discount rates. Since management does not intend to use these investments in current operations, these investments are classified as long-term.
| The estimated fair values of short-term and long-term investments for Duke Energy, Duke Energy Carolinas and Duke Energy | |||||||||||||||||
Indiana are as follows (in millions): | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2012 |
| December 31, 2011 | ||||||||||||||
(in millions) | Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value |
| Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value | |||||||
Duke Energy Carolinas NDTF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity Securities | $ | 522 |
| $ | 17 |
| $ | 1,470 |
| $ | 443 |
| $ | 16 |
| $ | 1,337 | |
Corporate Debt Securities |
| 10 |
|
| 2 |
|
| 221 |
|
| 8 |
|
| 2 |
|
| 205 | |
Municipal Bonds |
| 2 |
|
| ― |
|
| 73 |
|
| 2 |
|
| ― |
|
| 51 | |
U.S. Government Bonds |
| 12 |
|
| ― |
|
| 277 |
|
| 16 |
|
| ― |
|
| 306 | |
Other |
| 4 |
|
| 1 |
|
| 163 |
|
| 4 |
|
| 4 |
|
| 161 | |
Total Duke Energy Carolinas NDTF(a) | $ | 550 |
| $ | 20 |
| $ | 2,204 |
| $ | 473 |
| $ | 22 |
| $ | 2,060 | |
Duke Energy Indiana Grantor Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity Securities | $ | 7 |
| $ | 1 |
| $ | 46 |
| $ | 5 |
| $ | 1 |
| $ | 46 | |
Municipal Bonds |
| 1 |
|
| ― |
|
| 28 |
|
| 1 |
|
| ― |
|
| 28 | |
Total Duke Energy Indiana Grantor Trust(a) | $ | 8 |
| $ | 1 |
| $ | 74 |
| $ | 6 |
| $ | 1 |
| $ | 74 | |
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity Securities | $ | 1 |
| $ | 1 |
| $ | 20 |
| $ | ― |
| $ | 1 |
| $ | 14 | |
Corporate Debt Securities |
| 2 |
|
| ― |
|
| 295 |
|
| 1 |
|
| 1 |
|
| 241 | |
Municipal Bonds |
| ― |
|
| ― |
|
| 1 |
|
| ― |
|
| ― |
|
| ― | |
U.S. Government Bonds |
| ― |
|
| ― |
|
| 28 |
|
| 1 |
|
| ― |
|
| 21 | |
Other |
| 1 |
|
| ― |
|
| 107 |
|
| 2 |
|
| ― |
|
| 68 | |
Auction Rate Securities(b) |
| ― |
|
| 9 |
|
| 41 |
|
| ― |
|
| 17 |
|
| 71 | |
Total Other Investments | $ | 4 |
| $ | 10 |
| $ | 492 |
| $ | 4 |
| $ | 19 |
| $ | 415 | |
Total Duke Energy Investments | $ | 562 |
| $ | 31 |
| $ | 2,770 |
| $ | 483 |
| $ | 42 |
| $ | 2,549 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Unrealized losses on investments within the Duke Energy Carolinas NDTF and Duke Energy Indiana grantor trust are deferred as regulatory assets pursuant to regulatory accounting treatment. | |||||||||||||||||
(b) | At June 30, 2012 and December 31, 2011, $6 million and $12 million of these securities were held by Duke Energy Carolinas, respectively. Gross unrealized holding gains on these securities held by Duke Energy Carolinas were insignificant at both June 30, 2012 and December 31, 2011. Gross unrealized holding losses on these securities held by Duke Energy Carolinas were $1 million at June 30, 2012 and $3 million at December 31, 2011. |
DUKE ENERGY | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table presents the estimated fair value of short-term and long-term investments for Duke Energy. For investments held within the NDTF, and investments within Grantor Trusts which are classified as Other Investments below, unrealized holding gains and losses are recognized immediately and recorded as Regulatory assets or Regulatory liabilities on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value |
| Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
NDTF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | ― |
|
| $ | ― |
| $ | 91 |
|
| $ | ― |
|
| $ | ― |
| $ | 105 | |||||||||||||||||||||||||||||||||||||||
Equity securities |
|
| 1,418 |
|
|
| 27 |
|
| 3,170 |
|
|
| 1,132 |
|
|
| 19 |
|
| 2,837 | |||||||||||||||||||||||||||||||||||||||
Corporate debt securities |
|
| 10 |
|
|
| 8 |
|
| 324 |
|
|
| 21 |
|
|
| 1 |
|
| 338 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
|
| 6 |
|
|
| 6 |
|
| 205 |
|
|
| 12 |
|
|
| 1 |
|
| 194 | |||||||||||||||||||||||||||||||||||||||
U.S. government bonds |
|
| 12 |
|
|
| 13 |
|
| 625 |
|
|
| 24 |
|
|
| 1 |
|
| 625 | |||||||||||||||||||||||||||||||||||||||
Other debt securities |
|
| 16 |
|
|
| 4 |
|
| 163 |
|
|
| 10 |
|
|
| 1 |
|
| 164 | |||||||||||||||||||||||||||||||||||||||
Total NDTF |
|
| 1,462 |
|
|
| 58 |
|
| 4,578 |
|
|
| 1,199 |
|
|
| 23 |
|
| 4,263 | |||||||||||||||||||||||||||||||||||||||
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
|
| ― |
|
|
| ― |
|
| 19 |
|
|
| ― |
|
|
| ― |
|
| 17 | |||||||||||||||||||||||||||||||||||||||
Equity securities |
|
| 17 |
|
|
| 1 |
|
| 78 |
|
|
| 10 |
|
|
| ― |
|
| 63 | |||||||||||||||||||||||||||||||||||||||
Corporate debt securities |
|
| 1 |
|
|
| 2 |
|
| 334 |
|
|
| 2 |
|
|
| ― |
|
| 381 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
|
| 3 |
|
|
| 2 |
|
| 77 |
|
|
| 4 |
|
|
| 1 |
|
| 70 | |||||||||||||||||||||||||||||||||||||||
U.S. government bonds |
|
| ― |
|
|
| ― |
|
| 46 |
|
|
| ― |
|
|
| ― |
|
| 23 | |||||||||||||||||||||||||||||||||||||||
Other debt securities |
|
| ― |
|
|
| 2 |
|
| 96 |
|
|
| 1 |
|
|
| ― |
|
| 86 | |||||||||||||||||||||||||||||||||||||||
Auction rate securities |
|
| ― |
|
|
| 7 |
|
| 26 |
|
|
| ― |
|
|
| 6 |
|
| 29 | |||||||||||||||||||||||||||||||||||||||
Total Other Investments(a) |
|
| 21 |
|
|
| 14 |
|
| 676 |
|
|
| 17 |
|
|
| 7 |
|
| 669 | |||||||||||||||||||||||||||||||||||||||
Total Investments |
| $ | 1,483 |
|
| $ | 72 |
| $ | 5,254 |
|
| $ | 1,216 |
|
| $ | 30 |
| $ | 4,932 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
(a) | These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
The table below summarizes the maturity date for debt securities held by Duke Energy. The table below excludes auction rate securities based on the stated maturity date. See Note 10 for information about fair value measurements related to investments in auction rate debt securities. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due in one year or less |
| $ | 340 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after one through five years |
|
| 392 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after five through 10 years |
|
| 366 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after 10 years |
|
| 772 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| $ | 1,870 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains and losses, which were determined on a specific basis, from sales of Duke Energy's available-for-sale securities were as follows. |
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
|
| 2013 |
| 2012 |
|
|
| 2013 |
| 2012 |
| |||||||||||||||||||||||||||||||||||||
Realized gains |
| $ | 32 |
| $ | 29 |
|
| $ | 63 |
| $ | 50 |
| |||||||||||||||||||||||||||||||||||
Realized losses |
|
| 15 |
|
| ― |
|
|
| 22 |
|
| 2 |
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
DUKE ENERGY CAROLINAS | |||||||||||||||||||||||||||||||||||||||||||||||||
5875
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
| The table below summarizes the maturity date for debt securities held by Duke Energy, Duke Energy Carolinas, and Duke Energy Indiana. | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) | < 1 Year |
| 1-5 Years |
| 6-10 Years |
| Thereafter | |||||
Duke Energy(a) | $ | 164 |
| $ | 345 |
| $ | 212 |
| $ | 471 | |
Duke Energy Carolinas(a) | $ | 45 |
| $ | 146 |
| $ | 174 |
| $ | 369 | |
Duke Energy Indiana | $ | ― |
| $ | 21 |
| $ | 5 |
| $ | 2 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Excludes auction rate securities based on the stated maturity date. See Note 9 for information about fair value measurements related to investments in auction rate debt securities. |
The following table presents the estimated fair value of short-term and long-term investments for Duke Energy Carolinas. For investments held within the NDTF, unrealized holding gains and losses are recognized immediately and recorded as Regulatory assets or Regulatory liabilities on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value |
| Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
NDTF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | ― |
|
| $ | ― |
| $ | 32 |
|
| $ | ― |
|
| $ | ― |
| $ | 40 | |||||||||||||||||||||||||||||||||||||||
Equity securities |
|
| 754 |
|
|
| 13 |
|
| 1,763 |
|
|
| 600 |
|
|
| 5 |
|
| 1,592 | |||||||||||||||||||||||||||||||||||||||
Corporate debt securities |
|
| 5 |
|
|
| 6 |
|
| 234 |
|
|
| 11 |
|
|
| 1 |
|
| 250 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
|
| ― |
|
|
| 1 |
|
| 42 |
|
|
| 2 |
|
|
| ― |
|
| 40 | |||||||||||||||||||||||||||||||||||||||
U.S. government bonds |
|
| 4 |
|
|
| 7 |
|
| 321 |
|
|
| 10 |
|
|
| ― |
|
| 304 | |||||||||||||||||||||||||||||||||||||||
Other debt securities |
|
| 15 |
|
|
| 4 |
|
| 141 |
|
|
| 9 |
|
|
| 2 |
|
| 135 | |||||||||||||||||||||||||||||||||||||||
Total NDTF |
|
| 778 |
|
|
| 31 |
|
| 2,533 |
|
|
| 632 |
|
|
| 8 |
|
| 2,361 | |||||||||||||||||||||||||||||||||||||||
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Auction rate securities |
|
| ― |
|
|
| 1 |
|
| 3 |
|
|
| ― |
|
|
| 1 |
|
| 3 | |||||||||||||||||||||||||||||||||||||||
Total Other Investments(a) |
|
| ― |
|
|
| 1 |
|
| 3 |
|
|
| ― |
|
|
| 1 |
|
| 3 | |||||||||||||||||||||||||||||||||||||||
Total Investments |
| $ | 778 |
|
| $ | 32 |
| $ | 2,536 |
|
| $ | 632 |
|
| $ | 9 |
| $ | 2,364 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
(a) | These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The table below summarizes the maturity date for debt securities held by Duke Energy Carolinas. The table below excludes auction rate securities based on the stated maturity date. See Note 10 for information about fair value measurements related to investments in auction rate debt securities. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due in one year or less |
| $ | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after one through five years |
|
| 172 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after five through 10 years |
|
| 183 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after 10 years |
|
| 369 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| $ | 738 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains and losses, which were determined on a specific basis, from sales of Duke Energy Carolinas' available-for-sale securities were as follows. |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
|
| 2013 |
| 2012 |
|
|
| 2013 |
| 2012 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains |
| $ | 21 |
| $ | 26 |
|
| $ | 46 |
| $ | 46 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Realized losses |
|
| 6 |
|
| ― |
|
|
| 10 |
|
| 2 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
PROGRESS ENERGY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
|
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|
|
|
|
|
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| ||||||||||||||||||||||||||||||||||||||||
76
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following table presents the estimated fair value of short-term and long-term investments for Progress Energy. For investments held within the NDTF, and investments within Grantor Trusts which are classified as Other Investments below, unrealized holding gains and losses are recognized immediately and recorded as Regulatory assets or Regulatory liabilities on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value |
| Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
NDTF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | ― |
|
| $ | ― |
| $ | 59 |
|
| $ | ― |
|
| $ | ― |
| $ | 65 | |||||||||||||||||||||||||||||||||||||||
Equity securities |
|
| 664 |
|
|
| 14 |
|
| 1,407 |
|
|
| 532 |
|
|
| 14 |
|
| 1,245 | |||||||||||||||||||||||||||||||||||||||
Corporate debt securities |
|
| 5 |
|
|
| 2 |
|
| 90 |
|
|
| 9 |
|
|
| ― |
|
| 89 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
|
| 6 |
|
|
| 5 |
|
| 163 |
|
|
| 11 |
|
|
| 1 |
|
| 154 | |||||||||||||||||||||||||||||||||||||||
U.S. government bonds |
|
| 8 |
|
|
| 6 |
|
| 304 |
|
|
| 14 |
|
|
| ― |
|
| 321 | |||||||||||||||||||||||||||||||||||||||
Other debt securities |
|
| 1 |
|
|
| ― |
|
| 22 |
|
|
| 1 |
|
|
| ― |
|
| 28 | |||||||||||||||||||||||||||||||||||||||
Total NDTF |
|
| 684 |
|
|
| 27 |
|
| 2,045 |
|
|
| 567 |
|
|
| 15 |
|
| 1,902 | |||||||||||||||||||||||||||||||||||||||
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
|
| ― |
|
|
| ― |
|
| 19 |
|
|
| ― |
|
|
| ― |
|
| 17 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
|
| 3 |
|
|
| 1 |
|
| 40 |
|
|
| 3 |
|
|
| ― |
|
| 40 | |||||||||||||||||||||||||||||||||||||||
Total Other Investments(a) |
|
| 3 |
|
|
| 1 |
|
| 59 |
|
|
| 3 |
|
|
| ― |
|
| 57 | |||||||||||||||||||||||||||||||||||||||
Total Investments |
| $ | 687 |
|
| $ | 28 |
| $ | 2,104 |
|
| $ | 570 |
|
| $ | 15 |
| $ | 1,959 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
(a) | These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
The table below summarizes the maturity date for debt securities held by Progress Energy. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due in one year or less |
| $ | 20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after one through five years |
|
| 150 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after five through 10 years |
|
| 139 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after 10 years |
|
| 310 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| $ | 619 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains and losses, which were determined on a specific basis, from sales of Progress Energy's available-for-sale securities were as follows. |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
|
| 2013 |
| 2012 |
|
|
| 2013 |
| 2012 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains |
| $ | 10 |
| $ | 8 |
|
| $ | 15 |
| $ | 15 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Realized losses |
|
| 7 |
|
| 1 |
|
|
| 9 |
|
| ― |
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
DUKE ENERGY PROGRESS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
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|
|
|
| ||||||||||||||||||||||||||||||||||||||||
77
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following table presents the estimated fair value of short-term and long-term investments for Duke Energy Progress. For investments held within the NDTF, and investments within Grantor Trusts which are classified as Other Investments below, unrealized holding gains and losses are recognized immediately and recorded as Regulatory assets or Regulatory liabilities on the Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value |
| Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
NDTF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | ― |
|
| $ | ― |
| $ | 32 |
|
| $ | ― |
|
| $ | ― |
| $ | 55 | |||||||||||||||||||||||||||||||||||||||
Equity securities |
|
| 425 |
|
|
| 10 |
|
| 919 |
|
|
| 337 |
|
|
| 11 |
|
| 811 | |||||||||||||||||||||||||||||||||||||||
Corporate debt securities |
|
| 4 |
|
|
| 2 |
|
| 80 |
|
|
| 8 |
|
|
| ― |
|
| 78 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
|
| 3 |
|
|
| 4 |
|
| 102 |
|
|
| 4 |
|
|
| ― |
|
| 80 | |||||||||||||||||||||||||||||||||||||||
U.S. government bonds |
|
| 8 |
|
|
| 3 |
|
| 228 |
|
|
| 13 |
|
|
| ― |
|
| 241 | |||||||||||||||||||||||||||||||||||||||
Other debt securities |
|
| 1 |
|
|
| ― |
|
| 11 |
|
|
| 1 |
|
|
| ― |
|
| 10 | |||||||||||||||||||||||||||||||||||||||
Total NDTF |
|
| 441 |
|
|
| 19 |
|
| 1,372 |
|
|
| 363 |
|
|
| 11 |
|
| 1,275 | |||||||||||||||||||||||||||||||||||||||
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
|
| ― |
|
|
| ― |
|
| 2 |
|
|
| ― |
|
|
| ― |
|
| 3 | |||||||||||||||||||||||||||||||||||||||
Total Other Investments(a) |
|
| ― |
|
|
| ― |
|
| 2 |
|
|
| ― |
|
|
| ― |
|
| 3 | |||||||||||||||||||||||||||||||||||||||
Total Investments |
| $ | 441 |
|
| $ | 19 |
| $ | 1,374 |
|
| $ | 363 |
|
| $ | 11 |
| $ | 1,278 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
(a) | These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
The table below summarizes the maturity date for debt securities held by Duke Energy Progress. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due in one year or less |
| $ | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after one through five years |
|
| 132 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after five through 10 years |
|
| 76 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after 10 years |
|
| 201 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| $ | 421 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains and losses, which were determined on a specific basis, from sales of Duke Energy Progress' available-for-sale securities were as follows. |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
|
| 2013 |
| 2012 |
|
|
| 2013 |
| 2012 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains |
| $ | 6 |
| $ | 5 |
|
| $ | 8 |
| $ | 10 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Realized losses |
|
| 3 |
|
| 1 |
|
|
| 4 |
|
| 3 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
DUKE ENERGY FLORIDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
|
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|
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|
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| ||||||||||||||||||||||||||||||||||||||||
78
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following table presents the estimated fair value of short-term and long-term investments for Duke Energy Florida. For investments held within the NDTF, and investments within Grantor Trusts which are classified as Other Investments below, unrealized holding gains and losses are recognized immediately and recorded as Regulatory assets or Regulatory liabilities on the Condensed Balance Sheets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value |
| Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
NDTF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | ― |
|
| $ | ― |
| $ | 27 |
|
| $ | ― |
|
| $ | ― |
| $ | 10 | |||||||||||||||||||||||||||||||||||||||
Equity securities |
|
| 239 |
|
|
| 4 |
|
| 488 |
|
|
| 194 |
|
|
| 4 |
|
| 434 | |||||||||||||||||||||||||||||||||||||||
Corporate debt securities |
|
| 1 |
|
|
| ― |
|
| 10 |
|
|
| 1 |
|
|
| ― |
|
| 11 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
|
| 3 |
|
|
| 1 |
|
| 61 |
|
|
| 7 |
|
|
| ― |
|
| 74 | |||||||||||||||||||||||||||||||||||||||
U.S. government bonds |
|
| ― |
|
|
| 3 |
|
| 76 |
|
|
| 1 |
|
|
| ― |
|
| 80 | |||||||||||||||||||||||||||||||||||||||
Other debt securities |
|
| ― |
|
|
| ― |
|
| 11 |
|
|
| 1 |
|
|
| ― |
|
| 18 | |||||||||||||||||||||||||||||||||||||||
Total NDTF |
|
| 243 |
|
|
| 8 |
|
| 673 |
|
|
| 204 |
|
|
| 4 |
|
| 627 | |||||||||||||||||||||||||||||||||||||||
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
|
| ― |
|
|
| ― |
|
| 3 |
|
|
| ― |
|
|
| ― |
|
| 1 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
|
| 3 |
|
|
| ― |
|
| 40 |
|
|
| 3 |
|
|
| ― |
|
| 40 | |||||||||||||||||||||||||||||||||||||||
Total Other Investments(a) |
|
| 3 |
|
|
| ― |
|
| 43 |
|
|
| 3 |
|
|
| ― |
|
| 41 | |||||||||||||||||||||||||||||||||||||||
Total Investments |
| $ | 246 |
|
| $ | 8 |
| $ | 716 |
|
| $ | 207 |
|
| $ | 4 |
| $ | 668 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
(a) | These amounts are recorded in Other within Investments and Other Assets on the Condensed Balance sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
The table below summarizes the maturity date for debt securities held by Duke Energy Florida. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due in one year or less |
| $ | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after one through five years |
|
| 18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after five through 10 years |
|
| 63 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after 10 years |
|
| 109 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| $ | 198 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains and losses, which were determined on a specific basis, from sales of Duke Energy Florida's available-for-sale securities were as follows. |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
|
| 2013 |
| 2012 |
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| 2013 |
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| 2012 |
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Realized gains |
| $ | 5 |
| $ | 3 |
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| $ | 8 |
| $ | 5 |
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Realized losses |
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| 3 |
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| 2 |
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| 4 |
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| 3 |
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DUKE ENERGY INDIANA |
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79
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following table presents the estimated fair value of short-term and long-term investments for Duke Energy Indiana. Unrealized holding gains and losses on these investments are recognized immediately and recorded as Regulatory assets or Regulatory liabilities on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value |
| Gross Unrealized Holding Gains |
| Gross Unrealized Holding Losses |
| Estimated Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
Other Investments |
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Equity securities |
| $ | 15 |
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| $ | ― |
| $ | 56 |
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| $ | 9 |
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| $ | ― |
| $ | 50 | |||||||||||||||||||||||||||||||||||||||
Municipal bonds |
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| ― |
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| 1 |
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| 28 |
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| 1 |
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| ― |
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| 28 | |||||||||||||||||||||||||||||||||||||||
Total Other Investments(a) |
|
| 15 |
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|
| 1 |
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| 84 |
|
|
| 10 |
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|
| ― |
| $ | 78 | |||||||||||||||||||||||||||||||||||||||
Total Investments |
| $ | 15 |
|
| $ | 1 |
| $ | 84 |
|
| $ | 10 |
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| $ | ― |
| $ | 78 | |||||||||||||||||||||||||||||||||||||||
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(a) | These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The table below summarizes the maturity date for debt securities held by Duke Energy Indiana. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(in millions) | June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due in one year or less |
| $ | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after one through five years |
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| 20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after five through 10 years |
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| 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due after 10 years |
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| 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| $ | 28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Realized gains and losses, which were determined on a specific basis, from sales of Duke Energy Indiana's available-for-sale securities were insignificant for each of the three and six months ended June 30, 2013 and 2012. | ||||||||||||||||||||||||||||
10. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Under existing accounting guidance, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. The fair value definition focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability versus an entry price, which would be the price paid to acquire an asset or received to assume a liability. Fair value measurements require the use of market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, corroborated by market data or generally unobservable. Valuation techniques are required to maximize the use of observable inputs and minimize the use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.
The Duke Energy Registrants classify recurring and non-recurring fair value measurements based on the following fair value hierarchy, as prescribed by the accounting guidance for fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels.
Level 1—unadjusted quoted prices in active markets for identical assets or liabilities the Duke Energy Registrants have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information. The Duke Energy Registrants’ Level 1 primarily consists of financial instruments such as exchange-traded derivatives and listed equities.
Level 2—a fair value measurement utilizing inputs other than a quoted market price that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates. A Level 2 measurement cannot have more than an insignificant portion of the valuation based on unobservable inputs. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in less than active markets.
Level 3—any fair value measurement which includes unobservable inputs for the asset or liability for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 instruments may include longer-term instruments that extend into periods in which quoted prices or other observable inputs are not available.
The fair valuesvalue accounting guidance for financial instruments permits entities to elect to measure many financial instruments and gross unrealized lossescertain other items at fair value that are not required to be accounted for at fair value under other GAAP. There are no financial assets or financial liabilities that are not required to be accounted for at fair value under GAAP for which the option to record at fair value has been elected by the Duke Energy Registrants. However, in the future, the Duke Energy Registrants may elect to measure certain financial instruments at fair value in accordance with this accounting guidance.
80
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Transfers out of available-for-sale debt and into Levels 1, 2 or 3 represent existing assets or liabilities previously categorized as a higher level for which the inputs to the estimate became less observable or assets and liabilities that were previously classified as Level 2 or 3 for which the lowest significant input became more observable during the period, respectively. The Duke Energy Registrant’s policy for the recognition of transfers between levels of the fair value hierarchy is to recognize the transfer at the end of the period. There were no transfers out of or into Levels 1, 2 and 3 during the three and six months ended June 30, 2013 and 2012.
Investments in equity securities
Investments in equity securities, whichother than those accounted for as equity and cost method investments, are typically valued at the closing price in an unrealized loss positionthe principal active market as of the last business day of the reporting period. Principal active markets for which other-than-temporary impairment lossesequity prices include published exchanges such as NASDAQ and NYSE. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. Prices have not been recorded, summarizedadjusted to reflect for after-hours market activity. The majority of investments in equity securities are valued using Level 1 measurements. For certain investments that are valued on a net asset value per share (or its equivalent), or the net asset value basis, when the Duke Energy Registrants do not have the ability to redeem the investment in the near term at net asset value per share (or its equivalent), or the net asset value is not available as of the measurement date, the fair value measurement of the investment is categorized as Level 3.
Investments in available-for-sale auction rate securities
Duke Energy and Duke Energy Carolinas hold auction rate securities for which an active market does not currently exist. Auction rate securities held are student loan securities for which at June 30, 2013 approximately 84 percent are ultimately backed by the U.S. government. At June 30, 2013, approximately 23 percent of these securities are AAA rated. As of June 30, 2013, and December 31, 2012 all of these auction rate securities are classified as long-term investments and are valued using Level 3 measurements. The methods and significant assumptions used to determine the fair values of the investment typein auction rate debt securities represent estimations of fair value using internal discounted cash flow models, which incorporate primarily management’s own assumptions as to the term over which such investments will be recovered at par (ranging from 10 to 19 years), the current level of interest rates (less than 0.2%), and lengththe appropriate risk-adjusted discount rates (up to 5.8% reflecting a tenor of timeup to 19 years). In preparing the valuations, all significant value drivers were considered, including the underlying collateral (primarily evaluated on the basis of credit ratings, parity ratios and the percentage of loans backed by the U.S. government).
There were no other-than-temporary impairments associated with investments in auction rate debt securities during the three and six months ended June 30, 2013 or 2012.
Investments in debt securities
Most debt investments are valued based on a calculation using interest rate curves and credit spreads applied to the terms of the debt instrument (maturity and coupon interest rate) and consider the counterparty credit rating. Most debt valuations are Level 2 measurements. If the market for a particular fixed income security is relatively inactive or illiquid, the measurement is a Level 3 measurement. U.S. Treasury debt is typically a Level 1 measurement.
Commodity derivatives
The pricing for commodity derivatives is primarily a calculated value which incorporates the forward price and is adjusted for liquidity (bid-ask spread), credit or non-performance risk (after reflecting credit enhancements such as collateral) and discounted to present value. The primary difference between a Level 2 and a Level 3 measurement relates to the level of activity in forward markets for the commodity. If the market is relatively inactive, the measurement is deemed to be a Level 3 measurement. Commodity derivatives with clearinghouses are classified as Level 1 measurements. For commodity derivative contracts classified as Level 3, Duke Energy utilizes internally-developed financial models based upon the income approach (discounted cash flow method) to measure the fair values. The primary inputs to these models are the forward commodity prices used to develop the forward price curves for the respective instrument. The pricing inputs are derived from published exchange transaction prices and other observable or public data sources. In the absence of observable market information that supports the pricing inputs, there is a presumption that the securities have beentransaction price is equal to the last observable price for a similar period. For the commodity derivative contracts classified as Level 3, the pricing inputs for natural gas and electricity forward price curves are not observable for the full term of the related contracts. In isolation, increases (decreases) in unobservable natural gas forward prices would result in favorable (unfavorable) fair value adjustments for gas purchase contracts. In isolation, increases (decreases) in unobservable electricity forward prices would result in unfavorable (favorable) fair value adjustments for electricity sales contracts. Duke Energy regularly evaluates and validates the pricing inputs used to estimate the fair value of gas purchase contracts by a continuous loss position,market participant price verification procedure, which provides a comparison of internal forward commodity curves to market participant generated curves.
Interest rate derivatives
Most over-the-counter interest rate contract derivatives are presentedvalued using financial models which utilize observable inputs for similar instruments and are classified within Level 2. Such models may be internally developed, but are similar to models commonly used across industries to value derivative contracts. To determine fair value, the Duke Energy Registrants utilize various inputs and factors including market data and assumptions that market participants would use in pricing assets or liabilities as well as assumptions about the risks inherent in the inputs to the valuation technique. The inputs and factors may include forward interest rate curves, notional amounts, interest rates and credit quality of the Duke Energy Registrants and their counterparties.
Goodwill and Long-lived Assets. See Note 12, Goodwill and Intangible Assets, to the Consolidated Financial Statements included in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of the valuation for goodwill and long-lived assets.
81
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
DUKE ENERGY
The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy's Condensed Consolidated Balance Sheets. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Duke Energy’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 9 for additional information related to investments by major security type.
|
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| ||||||||||||||||||||||||||
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|
| June 30, 2013 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Investments in available-for-sale auction rate securities(a) |
| $ | 26 |
| $ | ― |
| $ | ― |
| $ | 26 | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
|
| 3,170 |
|
| 3,086 |
|
| 63 |
|
| 21 | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund debt securities |
|
| 1,397 |
|
| 332 |
|
| 1,015 |
|
| 50 | |||||||||||||||||||||||||||
Other trading and available-for-sale equity securities(b) |
|
| 88 |
|
| 78 |
|
| 10 |
|
| ― | |||||||||||||||||||||||||||
Other trading and available-for-sale debt securities(c) |
|
| 580 |
|
| 64 |
|
| 516 |
|
| ― | |||||||||||||||||||||||||||
Derivative assets(b) |
|
| 102 |
|
| 22 |
|
| 10 |
|
| 70 | |||||||||||||||||||||||||||
| Total assets |
|
| 5,363 |
|
| 3,582 |
|
| 1,614 |
|
| 167 | ||||||||||||||||||||||||||
Derivative liabilities(d) |
|
| (549) |
|
| (8) |
|
| (384) |
|
| (157) | |||||||||||||||||||||||||||
| Net assets |
| $ | 4,814 |
| $ | 3,574 |
| $ | 1,230 |
| $ | 10 | ||||||||||||||||||||||||||
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| December 31, 2012 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Investments in available-for-sale auction rate securities(a) |
| $ | 29 |
| $ | ― |
| $ | ― |
| $ | 29 | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
|
| 2,837 |
|
| 2,762 |
|
| 54 |
|
| 21 | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund debt securities |
|
| 1,405 |
|
| 317 |
|
| 1,040 |
|
| 48 | |||||||||||||||||||||||||||
Other trading and available-for-sale equity securities(b) |
|
| 72 |
|
| 63 |
|
| 9 |
|
| ― | |||||||||||||||||||||||||||
Other trading and available-for-sale debt securities(c) |
|
| 602 |
|
| 40 |
|
| 562 |
|
| ― | |||||||||||||||||||||||||||
Derivative assets(b) |
|
| 103 |
|
| 18 |
|
| 22 |
|
| 63 | |||||||||||||||||||||||||||
| Total assets |
|
| 5,048 |
|
| 3,200 |
|
| 1,687 |
|
| 161 | ||||||||||||||||||||||||||
Derivative liabilities(d) |
|
| (756) |
|
| (17) |
|
| (591) |
|
| (148) | |||||||||||||||||||||||||||
| Net assets |
| $ | 4,292 |
| $ | 3,183 |
| $ | 1,096 |
| $ | 13 | ||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||
(a) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Current Assets and Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet. | ||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Investments and Other Assets and Short-term Investments on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(d) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
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The following tables provide a reconciliation of beginning and ending balances of assets and liabilities measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3). | ||||||||||||||||||||||||||||||||||||||||
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| Three Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||||||||
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | |||||||||||||||||||||||||||||||||
Balance at March 31, 2013 | $ | 28 |
| $ | 70 |
| $ | (82) |
| $ | 16 | |||||||||||||||||||||||||||||
Total pretax realized or unrealized gains (losses) included in earnings: |
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| |||||||||||||||||||||||||||||
| Regulated electric |
| ― |
|
| ― |
|
| 8 |
|
| 8 | ||||||||||||||||||||||||||||
| Revenue, nonregulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (19) |
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| (19) | ||||||||||||||||||||||||||||
Total pretax gains included in other comprehensive income: |
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| |||||||||||||||||||||||||||||
| Losses on available for sale securities and other |
| (1) |
|
| ― |
|
| ― |
|
| (1) | ||||||||||||||||||||||||||||
Purchases, sales, issuances and settlements: |
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| |||||||||||||||||||||||||||||
| Purchases |
| ― |
|
| 3 |
|
| 21 |
|
| 24 | ||||||||||||||||||||||||||||
| Sales |
| ― |
|
| (3) |
|
| ― |
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| (3) | ||||||||||||||||||||||||||||
| Settlements |
| (1) |
|
| ― |
|
| (9) |
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| (10) | ||||||||||||||||||||||||||||
Total gains (losses) included on the Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 1 |
|
| (6) |
|
| (5) | |||||||||||||||||||||||||||||
Balance at June 30, 2013 | $ | 26 |
| $ | 71 |
| $ | (87) |
| $ | 10 | |||||||||||||||||||||||||||||
Pretax amounts included in the Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding at June 30, 2013 |
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| |||||||||||||||||||||||||||||
| Regulated electric | $ | ― |
| $ | ― |
| $ | 1 |
| $ | 1 | ||||||||||||||||||||||||||||
| Revenue, nonregulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (14) |
|
| (14) | ||||||||||||||||||||||||||||
Total | $ | ― |
| $ | ― |
| $ | (13) |
| $ | (13) | |||||||||||||||||||||||||||||
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82
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
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| ||||||||||||||||
|
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| Three Months Ended June 30, 2012 | ||||||||||||||||||||||||||
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | ||||||||||||||||||||||
Balance at March 31, 2012 | $ | 72 |
| $ | 56 |
| $ | (42) |
| $ | 86 | ||||||||||||||||||
Total pretax realized or unrealized gains (losses) included in earnings: |
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|
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|
|
| ||||||||||||||||||
| Regulated electric |
| ― |
|
| ― |
|
| 17 |
|
| 17 | |||||||||||||||||
| Revenue, nonregulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (1) |
|
| (1) | |||||||||||||||||
Total pretax gains included in other comprehensive income: |
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|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Gains on available for sale securities and other |
| 8 |
|
| ― |
|
| ― |
|
| 8 | |||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Purchases |
| ― |
|
| 7 |
|
| 22 |
|
| 29 | |||||||||||||||||
| Settlements |
| (39) |
|
| ― |
|
| (15) |
|
| (54) | |||||||||||||||||
Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 1 |
|
| ― |
|
| 1 | ||||||||||||||||||
Balance at June 30, 2012 | $ | 41 |
| $ | 64 |
| $ | (19) |
| $ | 86 | ||||||||||||||||||
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| ||||||||||||||||
|
|
| Six Months Ended June 30, 2013 | ||||||||||||||||||||||||||
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | ||||||||||||||||||||||
Balance at December 31, 2012 | $ | 29 |
| $ | 69 |
| $ | (85) |
| $ | 13 | ||||||||||||||||||
Total pretax realized or unrealized losses included in earnings: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Regulated electric |
| ― |
|
| ― |
|
| 2 |
|
| 2 | |||||||||||||||||
| Revenue, nonregulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (23) |
|
| (23) | |||||||||||||||||
Total pretax gains included in other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Losses on available for sale securities and other |
| (2) |
|
| ― |
|
| ― |
|
| (2) | |||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Purchases |
| ― |
|
| 3 |
|
| 21 |
|
| 24 | |||||||||||||||||
| Sales |
| ― |
|
| (3) |
|
| ― |
|
| (3) | |||||||||||||||||
| Issuances |
| ― |
|
| ― |
|
| 6 |
|
| 6 | |||||||||||||||||
| Settlements |
| (1) |
|
| ― |
|
| (2) |
|
| (3) | |||||||||||||||||
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 2 |
|
| (6) |
|
| (4) | ||||||||||||||||||
Balance at June 30, 2013 | $ | 26 |
| $ | 71 |
| $ | (87) |
| $ | 10 | ||||||||||||||||||
Pretax amounts included in the Condensed Consolidated Statement of Operations related to Level 3 measurements outstanding at June 30, 2013 |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Regulated electric | $ | ― |
| $ | ― |
| $ | 2 |
| $ | 2 | |||||||||||||||||
| Revenue, nonregulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (24) |
|
| (24) | |||||||||||||||||
Total | $ | ― |
| $ | ― |
| $ | (22) |
| $ | (22) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
| Six Months Ended June 30, 2012 | ||||||||||||||||||||||||||
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | ||||||||||||||||||||||
Balance at December 31, 2011 | $ | 71 |
| $ | 53 |
| $ | (39) |
| $ | 85 | ||||||||||||||||||
Total pretax realized or unrealized losses included in earnings: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Regulated electric |
| ― |
|
| ― |
|
| 25 |
|
| 25 | |||||||||||||||||
| Revenue, nonregulated electric, natural gas, and other |
| ― |
|
| ― |
|
| (3) |
|
| (3) | |||||||||||||||||
Total pretax gains included in other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Gains on available for sale securities and other |
| 9 |
|
| ― |
|
| ― |
|
| 9 | |||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Purchases |
| ― |
|
| 9 |
|
| 22 |
|
| 31 | |||||||||||||||||
| Settlements |
| (39) |
|
| ― |
|
| (24) |
|
| (63) | |||||||||||||||||
Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 2 |
|
| ― |
|
| 2 | ||||||||||||||||||
Balance at June 30, 2012 | $ | 41 |
| $ | 64 |
| $ | (19) |
| $ | 86 | ||||||||||||||||||
Pretax amounts included in the Condensed Consolidated Statement of Operations related to Level 3 measurements outstanding at June 30, 2012. |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| Revenue, nonregulated electric, natural gas, and other | $ | ― |
| $ | ― |
| $ | 3 |
| $ | 3 | |||||||||||||||||
Total | $ | ― |
| $ | ― |
| $ | 3 |
| $ | 3 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
83
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
DUKE ENERGY CAROLINAS
The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy Carolinas’ Condensed Consolidated Balance Sheets at fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Duke Energy Carolinas,Carolinas’ assessment of the significance of a particular input to the fair value measurement requires judgment and Duke Energy Indiana.may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 9 for additional information related to investments by major security type.
|
| June 30, 2012 |
| December 31, 2011 | ||||||||||||||
|
|
|
|
| Unrealized |
| Unrealized |
|
|
|
| Unrealized |
| Unrealized | ||||
|
|
|
|
| Loss |
| Loss |
|
|
|
| Loss |
| Loss | ||||
|
|
|
|
| Position |
| Position |
|
|
|
| Position |
| Position | ||||
(in millions) | Fair Value |
| >12 months |
| <12 months |
| Fair Value |
| >12 months |
| <12 months | |||||||
Duke Energy Carolinas NDTF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity Securities | $ | 117 |
| $ | 7 |
| $ | 11 |
| $ | 111 |
| $ | 4 |
| $ | 12 | |
Corporate Debt Securities |
| 29 |
|
| ― |
|
| 1 |
|
| 57 |
|
| 1 |
|
| 1 | |
Municipal Bonds |
| 21 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |
U.S. Government Bonds |
| 27 |
|
| ― |
|
| ― |
|
| 8 |
|
| ― |
|
| ― | |
Other |
| 78 |
|
| ― |
|
| 1 |
|
| 113 |
|
| 1 |
|
| 3 | |
Total Duke Energy Carolinas NDTF(a) | $ | 272 |
| $ | 7 |
| $ | 13 |
| $ | 289 |
| $ | 6 |
| $ | 16 | |
Duke Energy Indiana Grantor Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity Securities | $ | 8 |
| $ | ― |
| $ | 1 |
| $ | 8 |
| $ | ― |
| $ | 1 | |
Municipal Bonds |
| 10 |
|
| ― |
|
| ― |
|
| 3 |
|
| ― |
|
| ― | |
Total Duke Energy Indiana Grantor Trust(a) | $ | 18 |
| $ | ― |
| $ | 1 |
| $ | 11 |
| $ | ― |
| $ | 1 | |
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity Securities | $ | 6 |
| $ | 1 |
| $ | ― |
| $ | 4 |
| $ | 1 |
| $ | ― | |
Corporate Debt Securities |
| 243 |
|
| ― |
|
| ― |
|
| 201 |
|
| 1 |
|
| ― | |
Municipal Bonds |
| 1 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |
U.S. Government Bonds |
| 12 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |
Other |
| 11 |
|
| ― |
|
| ― |
|
| 8 |
|
| ― |
|
| ― | |
Auction Rate Securities(b) |
| 41 |
|
| 9 |
|
| ― |
|
| 71 |
|
| 17 |
|
| ― | |
Total Other Investments | $ | 314 |
| $ | 10 |
| $ | ― |
| $ | 284 |
| $ | 19 |
| $ | ― | |
Total Duke Energy Investments | $ | 604 |
| $ | 17 |
| $ | 14 |
| $ | 584 |
| $ | 25 |
| $ | 17 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Unrealized losses on investments within the Duke Energy Carolinas NDTF and Duke Energy Indiana grantor trust are deferred as regulatory assets pursuant to regulatory accounting treatment. | |||||||||||||||||
(b) | At June 30, 2012 and December 31, 2011, $6 million and $12 million of these securities, respectively, were held by Duke Energy | |||||||||||||||||
| Carolinas. The gross unrealized losses on these securities held by Duke Energy Carolinas which were in an unrealized loss position greater than 12 months were $1 million at June 30, 2012 and $3 million at December 31, 2011. |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
| June 30, 2013 | |||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||
Investments in available-for-sale auction rate securities(a) |
| $ | 3 |
| $ | ― |
| $ | ― |
| $ | 3 | |||||||||||||||
Nuclear decommissioning trust fund equity securities |
|
| 1,763 |
|
| 1,689 |
|
| 53 |
|
| 21 | |||||||||||||||
Nuclear decommissioning trust fund debt securities |
|
| 770 |
|
| 172 |
|
| 548 |
|
| 50 | |||||||||||||||
| Total assets |
|
| 2,536 |
|
| 1,861 |
|
| 601 |
|
| 74 | ||||||||||||||
Derivative liabilities(b) |
|
| (4) |
|
| ― |
|
| ― |
|
| (4) | |||||||||||||||
| Net assets |
| $ | 2,532 |
| $ | 1,861 |
| $ | 601 |
| $ | 70 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Investments in available-for-sale auction rate securities(a) |
| $ | 3 |
| $ | ― |
| $ | ― |
| $ | 3 | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
|
| 1,592 |
|
| 1,523 |
|
| 48 |
|
| 21 | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund debt securities |
|
| 762 |
|
| 155 |
|
| 559 |
|
| 48 | |||||||||||||||||||||||||||
| Total assets |
|
| 2,357 |
|
| 1,678 |
|
| 607 |
|
| 72 | ||||||||||||||||||||||||||
Derivative liabilities(b) |
|
| (12) |
|
| ― |
|
| ― |
|
| (12) | |||||||||||||||||||||||||||
| Net Assets |
| $ | 2,345 |
| $ | 1,678 |
| $ | 607 |
| $ | 60 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
(a) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet. | ||||||||||||||||||||||||||||||||||||||
The following tables provide a reconciliation of beginning and ending balances of assets and liabilities measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3). | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
| Three Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||||||||
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | |||||||||||||||||||||||||||||||||
Balance at March 31, 2013 | $ | 3 |
| $ | 70 |
| $ | (5) |
| $ | 68 | |||||||||||||||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Purchases |
| ― |
|
| 3 |
|
| ― |
|
| 3 | ||||||||||||||||||||||||||||
| Sales |
| ― |
|
| (3) |
|
| ― |
|
| (3) | ||||||||||||||||||||||||||||
| Settlements |
| ― |
|
| ― |
|
| 1 |
|
| 1 | ||||||||||||||||||||||||||||
Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 1 |
|
| ― |
|
| 1 | |||||||||||||||||||||||||||||
Balance at June 30, 2013 | $ | 3 |
| $ | 71 |
| $ | (4) |
| $ | 70 | |||||||||||||||||||||||||||||
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding at June 30, 2013 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Regulated electric | $ | ― |
| $ | ― |
| $ | 1 |
| $ | 1 | ||||||||||||||||||||||||||||
Total | $ | ― |
| $ | ― |
| $ | 1 |
| $ | 1 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
| Three Months Ended June 30, 2012 | |||||||||||||||||||||||||||||||||||||
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | |||||||||||||||||||||||||||||||||
Balance at March 31, 2012 | $ | 12 |
| $ | 56 |
| $ | ― |
| $ | 68 | |||||||||||||||||||||||||||||
Total pretax gains included in other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Gains on available for sale securities and other |
| 2 |
|
| ― |
|
| ― |
|
| 2 | ||||||||||||||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Purchases |
| ― |
|
| 7 |
|
| ― |
|
| 7 | ||||||||||||||||||||||||||||
| Settlements |
| (8) |
|
| ― |
|
| ― |
|
| (8) | ||||||||||||||||||||||||||||
Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 1 |
|
| ― |
|
| 1 | |||||||||||||||||||||||||||||
Balance at June 30, 2012 | $ | 6 |
| $ | 64 |
| $ | ― |
| $ | 70 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
| Six Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||||||||
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | |||||||||||||||||||||||||||||||||
Balance at December 31, 2012 | $ | 3 |
| $ | 69 |
| $ | (12) |
| $ | 60 | |||||||||||||||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Purchases |
| ― |
|
| 3 |
|
| ― |
|
| 3 | ||||||||||||||||||||||||||||
| Sales |
| ― |
|
| (3) |
|
| ― |
|
| (3) | ||||||||||||||||||||||||||||
| Settlements |
| ― |
|
| ― |
|
| 8 |
|
| 8 | ||||||||||||||||||||||||||||
Total gains included on the Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 2 |
|
| ― |
|
| 2 | |||||||||||||||||||||||||||||
Balance at June 30, 2013 | $ | 3 |
| $ | 71 |
| $ | (4) |
| $ | 70 | |||||||||||||||||||||||||||||
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding at June 30, 2013 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Regulated electric | $ | ― |
| $ | ― |
| $ | (4) |
| $ | (4) | ||||||||||||||||||||||||||||
Total | $ | ― |
| $ | ― |
| $ | (4) |
| $ | (4) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
| Six Months Ended June 30, 2012 | |||||||||||||||||||||||||||||||||||||
(in millions) | Available-for-Sale Auction Rate Securities |
| Available-for-Sale NDTF Investments |
| Derivatives (net) |
| Total | |||||||||||||||||||||||||||||||||
Balance at December 31, 2011 | $ | 12 |
| $ | 53 |
| $ | ― |
| $ | 65 | |||||||||||||||||||||||||||||
Total pretax gains included in other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Gains on available for sale securities and other |
| 2 |
|
| ― |
|
| ― |
|
| 2 | ||||||||||||||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Purchases |
| ― |
|
| 9 |
|
| ― |
|
| 9 | ||||||||||||||||||||||||||||
| Settlements |
| (8) |
|
| ― |
|
| ― |
|
| (8) | ||||||||||||||||||||||||||||
Total gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
| ― |
|
| 2 |
|
| ― |
|
| 2 | |||||||||||||||||||||||||||||
Balance at June 30, 2012 | $ | 6 |
| $ | 64 |
| $ | ― |
| $ | 70 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
84
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
PROGRESS ENERGY
The following tables provide the fair value measurement amounts for assets and liabilities recorded on Progress Energy's Condensed Consolidated Balance Sheets. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Progress Energy’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 9 for additional information related to investments by major security type.
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
| June 30, 2013 | ||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
| $ | 1,407 |
| $ | 1,397 |
| $ | 10 |
| $ | ― | |||||||||||||||
Nuclear decommissioning trust fund debt securities and other |
|
| 627 |
|
| 160 |
|
| 467 |
|
| ― | |||||||||||||||
Other trading and available-for-sale debt securities and other(a) |
|
| 59 |
|
| 19 |
|
| 40 |
|
| ― | |||||||||||||||
Derivative assets(b) |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||
| Total assets |
|
| 2,093 |
|
| 1,576 |
|
| 517 |
|
| ― | ||||||||||||||
Derivative liabilities(c) |
|
| (325) |
|
| ― |
|
| (290) |
|
| (35) | |||||||||||||||
| Net assets |
| $ | 1,768 |
| $ | 1,576 |
| $ | 227 |
| $ | (35) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
| $ | 1,245 |
| $ | 1,239 |
| $ | 6 |
| $ | ― | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund debt securities and other |
|
| 643 |
|
| 162 |
|
| 481 |
|
| ― | |||||||||||||||||||||||||||
Other trading and available-for-sale debt securities and other(a) |
|
| 57 |
|
| 17 |
|
| 40 |
|
| ― | |||||||||||||||||||||||||||
Derivative assets(b) |
|
| 11 |
|
| ― |
|
| 11 |
|
| ― | |||||||||||||||||||||||||||
| Total assets |
|
| 1,956 |
|
| 1,418 |
|
| 538 |
|
| ― | ||||||||||||||||||||||||||
Derivative liabilities(c) |
|
| (440) |
|
| ― |
|
| (402) |
|
| (38) | |||||||||||||||||||||||||||
| Net assets |
| $ | 1,516 |
| $ | 1,418 |
| $ | 136 |
| $ | (38) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
(a) | Included in Other within Investments and Other Assets in the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(b) | Included in Other Current Assets within Current Assets and Other within Investments and Other Assets in the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities in the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
85
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following tables provide a reconciliation of beginning and ending balances of assets and liabilities measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3). | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
| Derivatives (net) | |||||||||||||||||||
|
|
| Three Months Ended June 30, | |||||||||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||||||||||
Balance at beginning of period |
| $ | (31) |
| $ | (27) | ||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
| ||||||||||||||||
| Issuances |
|
| 1 |
|
| ― | |||||||||||||||
Total losses included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
|
| (5) |
|
| (3) | ||||||||||||||||
Balance at end of period |
| $ | (35) |
| $ | (30) | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
| Derivatives (net) | |||||||||||||||||||
|
|
| Six Months Ended June 30, | |||||||||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||||||||||
Balance at beginning of period |
| $ | (38) |
| $ | (24) | ||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
| ||||||||||||||||
| Issuances |
|
| 7 |
|
| ― | |||||||||||||||
Total losses included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
|
| (4) |
|
| (6) | ||||||||||||||||
Balance at end of period |
| $ | (35) |
| $ | (30) | ||||||||||||||||
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding at June 30, 2013 |
|
|
|
|
|
| ||||||||||||||||
| Regulated electric |
| $ | 6 |
| $ | ― | |||||||||||||||
Total |
| $ | 6 |
| $ | ― | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
DUKE ENERGY PROGRESS
The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy Progress' Condensed Consolidated Balance Sheets. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Duke Energy Progress’ assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 9 for additional information related to investments by major security type.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
|
|
| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | ||||||||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
| $ | 918 |
| $ | 918 |
| $ | ― |
| $ | ― | ||||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning trust fund debt securities and other |
|
| 442 |
|
| 124 |
|
| 318 |
|
| ― | ||||||||||||||||||||||||||||||||||||||||||||
Other trading and available-for-sale debt securities and other(a) |
|
| 2 |
|
| 2 |
|
| ― |
|
| ― | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets(b) |
|
| ― |
|
| ― |
|
| ― |
|
| ― | ||||||||||||||||||||||||||||||||||||||||||||
| Total assets |
|
| 1,362 |
|
| 1,044 |
|
| 318 |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||
Derivative liabilities(c) |
|
| (124) |
|
| ― |
|
| (89) |
|
| (35) | ||||||||||||||||||||||||||||||||||||||||||||
| Net assets |
| $ | 1,238 |
| $ | 1,044 |
| $ | 229 |
| $ | (35) | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
|
|
| December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | ||||||||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
| $ | 811 |
| $ | 811 |
| $ | ― |
| $ | ― | ||||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning trust fund debt securities and other |
|
| 448 |
|
| 119 |
|
| 329 |
|
| ― | ||||||||||||||||||||||||||||||||||||||||||||
Other trading and available-for-sale debt securities and other(a) |
|
| 3 |
|
| 3 |
|
| ― |
|
| ― | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets(b) |
|
| 2 |
|
| ― |
|
| 2 |
|
| ― | ||||||||||||||||||||||||||||||||||||||||||||
| Total assets |
|
| 1,264 |
|
| 933 |
|
| 331 |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||
Derivative liabilities(c) |
|
| (166) |
|
| ― |
|
| (128) |
|
| (38) | ||||||||||||||||||||||||||||||||||||||||||||
| Net assets |
| $ | 1,098 |
| $ | 933 |
| $ | 203 |
| $ | (38) | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
(a) | Included in Other within Investments and Other Assets in the Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Included in Other Current Assets within Current Assets and Other within Investments and Other Assets in the Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities in the Condensed Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
The following tables provide a reconciliation of beginning and ending balances of assets and liabilities measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3). | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| Derivatives (net) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
| $ | (31) |
| $ | (27) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances |
|
| 1 |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||||||||
Total losses included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
|
| (5) |
|
| (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at end of period |
| $ | (35) |
| $ | (28) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at June 30, 2013 |
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
| Regulated electric |
| $ | 1 |
| $ | ― | |||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| $ | 1 |
| $ | ― | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| Derivatives (net) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
| $ | (38) |
| $ | (24) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances |
|
| 7 |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||||||||
| Settlements |
|
| ― |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||||||||
Total losses included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
|
| (4) |
|
| (4) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at end of period |
| $ | (35) |
| $ | (28) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding at June 30, 2013 |
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
| Regulated electric |
| $ | 7 |
| $ | ― | |||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| $ | 7 |
| $ | ― | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
86
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
DUKE ENERGY FLORIDA
The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy Florida's Condensed Balance Sheets. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Duke Energy Florida’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 9 for additional information related to investments by major security type.
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
| June 30, 2013 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
| $ | 489 |
| $ | 479 |
| $ | 10 |
| $ | ― | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund debt securities and other |
|
| 185 |
|
| 36 |
|
| 149 |
|
| ― | |||||||||||||||||||||||||||
Other trading and available-for-sale debt securities and other(a) |
|
| 43 |
|
| 3 |
|
| 40 |
|
| ― | |||||||||||||||||||||||||||
Derivative assets(b) |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
| Total assets |
|
| 717 |
|
| 518 |
|
| 199 |
|
| ― | ||||||||||||||||||||||||||
Derivative liabilities(c) |
|
| (197) |
|
| ― |
|
| (197) |
|
| ― | |||||||||||||||||||||||||||
| Net assets |
| $ | 520 |
| $ | 518 |
| $ | 2 |
| $ | ― | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Nuclear decommissioning trust fund equity securities |
| $ | 435 |
| $ | 429 |
| $ | 6 |
| $ | ― | |||||||||||||||||||||||||||
Nuclear decommissioning trust fund debt securities and other |
|
| 194 |
|
| 43 |
|
| 151 |
|
| ― | |||||||||||||||||||||||||||
Other trading and available-for-sale debt securities and other(a) |
|
| 43 |
|
| 3 |
|
| 40 |
|
| ― | |||||||||||||||||||||||||||
Derivative assets(b) |
|
| 9 |
|
| ― |
|
| 9 |
|
| ― | |||||||||||||||||||||||||||
| Total assets |
|
| 681 |
|
| 475 |
|
| 206 |
|
| ― | ||||||||||||||||||||||||||
Derivative liabilities(c) |
|
| (270) |
|
| ― |
|
| (270) |
|
| ― | |||||||||||||||||||||||||||
| Net assets (liabilities) |
| $ | 411 |
| $ | 475 |
| $ | (64) |
| $ | ― | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
(a) | Included in Other within Investments and Other Assets in the Condensed Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(b) | Included in Other Current Assets within Current Assets and Other within Investments and Other Assets in the Condensed Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities in the Condensed Balance Sheets | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
87
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
DUKE ENERGY OHIO
The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy Ohio’s Condensed Consolidated Balance Sheets. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Duke Energy Ohio’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Derivative amounts in the table below exclude cash collateral amounts which are disclosed in Note 8.
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
| June 30, 2013 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Derivative assets(a) |
| $ | 55 |
| $ | 39 |
| $ | ― |
| $ | 16 | |||||||||||||||||||||||||||
Derivative liabilities(b) |
|
| (46) |
|
| (5) |
|
| (6) |
|
| (35) | |||||||||||||||||||||||||||
| Net liabilities |
| $ | 9 |
| $ | 34 |
| $ | (6) |
| $ | (19) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Derivative assets(a) |
| $ | 59 |
| $ | 48 |
| $ | 2 |
| $ | 9 | |||||||||||||||||||||||||||
Derivative liabilities(b) |
|
| (38) |
|
| (15) |
|
| (8) |
|
| (15) | |||||||||||||||||||||||||||
| Net assets (liabilities) |
| $ | 21 |
| $ | 33 |
| $ | (6) |
| $ | (6) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
(a) | Included in Other within Current Assets and Other within Investments and Other Assets in the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities in the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
The following tables provide a reconciliation of beginning and ending balances of assets and liabilities measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3). | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
| Derivatives (net) | |||||||||||||||||||
|
|
| Three Months Ended June 30, | |||||||||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||||||||||
Balance at beginning of period |
| $ | (5) |
| $ | (4) | ||||||||||||||||
Total pretax realized or unrealized gains (losses) included in earnings: |
|
|
|
|
|
| ||||||||||||||||
| Revenue, nonregulated electric, natural gas, and other |
|
| (14) |
|
| 1 | |||||||||||||||
Purchases, sales, issuances and settlements: |
|
|
|
|
|
| ||||||||||||||||
| Purchases |
|
| 1 |
|
| ― | |||||||||||||||
| Settlements |
|
| ― |
|
| 2 | |||||||||||||||
Total losses included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
|
| (1) |
|
| (1) | ||||||||||||||||
Balance at end of period |
| $ | (19) |
| $ | (2) | ||||||||||||||||
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at June 30, 2013: |
|
|
|
|
|
| ||||||||||||||||
| Revenue, non-regulated electric and other |
| $ | (11) |
| $ | ― | |||||||||||||||
Total |
| $ | (11) |
| $ | ― | ||||||||||||||||
|
|
|
|
|
|
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| Derivatives (net) | |||||||||||||||||||
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| Six Months Ended June 30, | |||||||||||||||||||
(in millions) |
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| 2013 |
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| 2012 | ||||||||||||||||
Balance at beginning of period |
| $ | (6) |
| $ | (3) | ||||||||||||||||
Total pretax realized or unrealized gains (losses) included in earnings: |
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| Revenue, nonregulated electric, natural gas, and other |
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| (10) |
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| 1 | |||||||||||||||
Purchases, sales, issuances and settlements: |
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| Purchases |
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| 1 |
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| ― | |||||||||||||||
| Settlements |
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| (3) |
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| 2 | |||||||||||||||
Total losses included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
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| (1) |
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| (2) | ||||||||||||||||
Balance at end of period |
| $ | (19) |
| $ | (2) | ||||||||||||||||
Pretax amounts included in the Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding at June 30, 2013: |
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| Revenue, non-regulated electric and other |
| $ | (13) |
| $ | 1 | |||||||||||||||
Total |
| $ | (13) |
| $ | 1 | ||||||||||||||||
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DUKE ENERGY INDIANA
The following tables provide the fair value measurement amounts for assets and liabilities recorded on Duke Energy Indiana’s Condensed Consolidated Balance Sheets. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Duke Energy Indiana’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Derivative
88
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
amounts in the table below exclude cash collateral amounts which are disclosed in Note 8. See Note 9 for additional information related to investments by major security type.
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| June 30, 2013 | ||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||
Available-for-sale equity securities(a) |
| $ | 56 |
| $ | 56 |
| $ | ― |
| $ | ― | |||||||||||||||
Available-for-sale debt securities(a) |
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| 28 |
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| ― |
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| 28 |
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| ― | |||||||||||||||
Derivative assets(b) |
|
| 18 |
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| ― |
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| ― |
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| 18 | |||||||||||||||
| Total assets |
|
| 102 |
|
| 56 |
|
| 28 |
| $ | 18 | ||||||||||||||
Derivative liabilities(c) |
|
| (37) |
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| (1) |
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| (36) |
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| ― | |||||||||||||||
| Net assets (liabilities) |
| $ | 65 |
| $ | 55 |
| $ | (8) |
| $ | 18 | ||||||||||||||
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| December 31, 2012 | ||||||||||||||||||||||||||||||||||||
(in millions) |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||||||||||||||||||||||||||||
Available-for-sale equity securities(a) |
| $ | 49 |
| $ | 49 |
| $ | ― |
| $ | ― | |||||||||||||||||||||||||||
Available-for-sale debt securities(a) |
|
| 29 |
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| ― |
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| 29 |
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| ― | |||||||||||||||||||||||||||
Derivative assets(b) |
|
| 10 |
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| ― |
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| ― |
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| 10 | |||||||||||||||||||||||||||
| Total assets |
|
| 88 |
|
| 49 |
|
| 29 |
| $ | 10 | ||||||||||||||||||||||||||
Derivative liabilities(c) |
|
| (63) |
|
| ― |
|
| (63) |
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| ― | |||||||||||||||||||||||||||
| Net assets (liabilities) |
| $ | 25 |
| $ | 49 |
| $ | (34) |
| $ | 10 | ||||||||||||||||||||||||||
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(a) | Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(b) | Included in Other within Current Assets on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
(c) | Included in Other within Current Liabilities and Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||
The following tables provide a reconciliation of beginning and ending balances of assets and liabilities measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3). | ||||||||||||||||||||||
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| Derivatives (net) | |||||||||||||||||||
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| Three Months Ended June 30, | |||||||||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||||||||||
Balance at beginning of period |
| $ | 4 |
| $ | 3 | ||||||||||||||||
Total pretax realized or unrealized gains (losses) included in earnings: |
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| Regulated electric |
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| 7 |
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| 16 | |||||||||||||||
Purchases, sales, issuances and settlements: |
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| Purchases |
|
| 20 |
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| ― | |||||||||||||||
| Sales |
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| ― |
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| 22 | |||||||||||||||
| Settlements |
|
| (13) |
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| (19) | |||||||||||||||
Balance at end of period |
| $ | 18 |
| $ | 22 | ||||||||||||||||
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| Derivatives (net) | |||||||||||||||||||
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| Six Months Ended June 30, | |||||||||||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | ||||||||||||||||
Balance at beginning of period |
| $ | 10 |
| $ | 4 | ||||||||||||||||
Total pretax realized or unrealized gains (losses) included in earnings: |
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| Regulated electric |
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| 2 |
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| 24 | |||||||||||||||
Purchases, sales, issuances and settlements: |
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| Sales |
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| 20 |
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| 22 | |||||||||||||||
| Settlements |
|
| (13) |
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| (29) | |||||||||||||||
Total (losses) gains included on the Condensed Consolidated Balance Sheet as regulatory asset or liability |
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| (1) |
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| 1 | ||||||||||||||||
Balance at end of period |
| $ | 18 |
| $ | 22 | ||||||||||||||||
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QUANTITATIVE DISCLOSURES ABOUT UNOBSERVABLE INPUTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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The following table includes quantitative information about the Duke Energy Registrants' derivatives classified as Level 3. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Type | Fair Value (in millions) |
| Valuation Technique |
| Unobservable Input | Range | |||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy |
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Commodity natural gas contracts | $ | (82) |
| Discounted cash flow |
| Forward natural gas curves - price per MMBtu | $ | 2.91 | - | 10.36 | |||||||||||||||||||||||||||||||||||||||||||
FERC mitigation power sale agreements |
| (8) |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 23.15 | - | 49.29 | |||||||||||||||||||||||||||||||||||||||||||
Financial transmission rights (FTRs) |
| 19 |
| RTO market pricing |
| FTR price |
| (3.25) | - | 10.83 | |||||||||||||||||||||||||||||||||||||||||||
Commodity power contracts |
| 3 |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 25.30 | - | 55.52 | |||||||||||||||||||||||||||||||||||||||||||
Commodity capacity contracts |
| (3) |
| Discounted cash flow |
| Forward capacity curves - price per MW day |
| 2.91 | - | 4.88 | |||||||||||||||||||||||||||||||||||||||||||
Commodity capacity option contracts |
| 2 |
| Discounted cash flow |
| Forward capacity option curves - price per MW day |
| 29.80 | - | 85.70 | |||||||||||||||||||||||||||||||||||||||||||
Reserves |
| (18) |
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| Bid-ask spreads, implied volatility, probability of default |
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Total Level 3 derivatives | $ | (87) |
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Duke Energy Carolinas |
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FERC mitigation power sale agreements | $ | (4) |
| Discounted cash flow |
| Forward electricity curves - price per MWh | $ | 25.92 | - | 49.29 | |||||||||||||||||||||||||||||||||||||||||||
Progress Energy |
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Commodity natural gas contracts | $ | (31) |
| Discounted cash flow |
| Forward natural gas curves - price per MMBtu | $ | 4.00 | - | 4.39 | |||||||||||||||||||||||||||||||||||||||||||
FERC mitigation power sale agreements |
| (4) |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 23.15 | - | 43.56 | |||||||||||||||||||||||||||||||||||||||||||
Total Level 3 derivatives | $ | (35) |
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Duke Energy Progress |
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Commodity natural gas contracts | $ | (31) |
| Discounted cash flow |
| Forward natural gas curves - price per MMBtu | $ | 4.00 | - | 4.39 | |||||||||||||||||||||||||||||||||||||||||||
FERC mitigation power sale agreements |
| (4) |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 23.15 | - | 43.56 | |||||||||||||||||||||||||||||||||||||||||||
Total Level 3 derivatives | $ | (35) |
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Duke Energy Ohio |
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Financial transmission rights (FTRs) | $ | 1 |
| RTO market pricing |
| FTR price | $ | (0.20) | - | 0.94 | |||||||||||||||||||||||||||||||||||||||||||
Commodity power contracts |
| 11 |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 25.30 | - | 55.52 | |||||||||||||||||||||||||||||||||||||||||||
Commodity natural gas contracts |
| (14) |
| Discounted cash flow |
| Forward natural gas curves - price per MMBtu |
| 2.91 | - | 4.88 | |||||||||||||||||||||||||||||||||||||||||||
Reserves |
| (17) |
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| Bid-ask spreads, implied volatility, probability of default |
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Total Level 3 derivatives | $ | (19) |
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Duke Energy Indiana |
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Financial transmission rights (FTRs) | $ | 18 |
| RTO market pricing |
| FTR price | $ | (3.25) | - | 10.83 | |||||||||||||||||||||||||||||||||||||||||||
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| December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Type | Fair Value (in millions) |
| Valuation Technique |
| Unobservable Input | Range | |||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy |
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Commodity natural gas contracts | $ | (53) |
| Discounted cash flow |
| Forward natural gas curves - price per MMBtu | $ | 2.33 | - | 9.99 | |||||||||||||||||||||||||||||||||||||||||||
FERC mitigation power sale agreements |
| (23) |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 25.83 | - | 48.69 | |||||||||||||||||||||||||||||||||||||||||||
Financial transmission rights (FTRs) |
| 11 |
| RTO market pricing |
| FTR price |
| 23.63 | - | 39.22 | |||||||||||||||||||||||||||||||||||||||||||
Commodity power contracts |
| (8) |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 24.82 | - | 77.96 | |||||||||||||||||||||||||||||||||||||||||||
Commodity capacity contracts |
| (3) |
| Discounted cash flow |
| Forward capacity curves - price per MW day |
| 95.16 | - | 105.36 | |||||||||||||||||||||||||||||||||||||||||||
Commodity capacity option contracts |
| 3 |
| Discounted cash flow |
| Forward capacity option curves - price per MW day |
| 4.68 | - | 77.96 | |||||||||||||||||||||||||||||||||||||||||||
Reserves |
| (12) |
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| Bid-ask spreads, implied volatility, probability of default |
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Total Level 3 derivatives | $ | (85) |
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Duke Energy Carolinas |
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FERC mitigation power sale agreements | $ | (12) |
| Discounted cash flow |
| Forward electricity curves - price per MWh | $ | 25.83 | - | 48.69 | |||||||||||||||||||||||||||||||||||||||||||
Progress Energy |
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Commodity natural gas contracts | $ | (27) |
| Discounted cash flow |
| Forward natural gas curves - price per MMBtu | $ | 4.07 | - | 4.45 | |||||||||||||||||||||||||||||||||||||||||||
FERC mitigation power sale agreements |
| (11) |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 25.83 | - | 48.69 | |||||||||||||||||||||||||||||||||||||||||||
Total Level 3 derivatives | $ | (38) |
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| �� |
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Duke Energy Progress |
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Commodity natural gas contracts | $ | (27) |
| Discounted cash flow |
| Forward natural gas curves - price per MMBtu | $ | 4.07 | - | 4.45 | |||||||||||||||||||||||||||||||||||||||||||
FERC mitigation power sale agreements |
| (11) |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 25.83 | - | 48.69 | |||||||||||||||||||||||||||||||||||||||||||
Total Level 3 derivatives | $ | (38) |
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Duke Energy Ohio |
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Financial transmission rights (FTRs) | $ | 1 |
| RTO market pricing |
| FTR price | $ | 27.17 | - | 39.22 | |||||||||||||||||||||||||||||||||||||||||||
Commodity power contracts |
| (1) |
| Discounted cash flow |
| Forward electricity curves - price per MWh |
| 25.90 | - | 57.50 | |||||||||||||||||||||||||||||||||||||||||||
Commodity natural gas contracts |
| 5 |
| Discounted cash flow |
| Forward natural gas curves - price per MMBtu |
| 3.30 | - | 4.51 | |||||||||||||||||||||||||||||||||||||||||||
Reserves |
| (11) |
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| Bid-ask spreads, implied volatility, probability of default |
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Total Level 3 derivatives | $ | (6) |
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Duke Energy Indiana |
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Financial transmission rights (FTRs) | $ | 10 |
| RTO market pricing |
| FTR price | $ | 23.63 | - | 35.43 | |||||||||||||||||||||||||||||||||||||||||||
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OTHER FAIR VALUE DISCLOSURES | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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The fair value of long-term debt, including current maturities, is summarized in the following table. Judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates determined are not necessarily indicative of the amounts the Duke Energy Registrants could have settled in current markets. The fair value of long-term debt is determined using Level 2 measurements. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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| June 30, 2013 |
| December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Book Value |
| Fair Value |
| Book Value |
| Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy (a) | $ | 39,582 |
| $ | 42,099 |
| $ | 39,461 |
| $ | 44,001 | ||||||||||||||||||||||||||||||||||||||||||
Duke Energy Carolinas(b) |
| 8,740 |
|
| 9,461 |
|
| 8,741 |
|
| 10,096 | ||||||||||||||||||||||||||||||||||||||||||
Progress Energy |
| 14,220 |
|
| 15,462 |
|
| 14,428 |
|
| 16,563 | ||||||||||||||||||||||||||||||||||||||||||
Duke Energy Progress |
| 5,336 |
|
| 5,488 |
|
| 4,840 |
|
| 5,277 | ||||||||||||||||||||||||||||||||||||||||||
Duke Energy Florida |
| 4,892 |
|
| 5,433 |
|
| 5,320 |
|
| 6,222 | ||||||||||||||||||||||||||||||||||||||||||
Duke Energy Ohio |
| 1,742 |
|
| 1,809 |
|
| 1,997 |
|
| 2,117 | ||||||||||||||||||||||||||||||||||||||||||
Duke Energy Indiana |
| 3,701 |
|
| 4,049 |
|
| 3,702 |
|
| 4,268 | ||||||||||||||||||||||||||||||||||||||||||
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89
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
(a) | Includes book value of Non-recourse long-term debt of variable interest entities of $1,259 million and $852 million June 30, 2013 and December 31, 2012, respectively. | ||||||||||||||||||||||
(b) | Includes book value of Non-recourse long-term debt of variable interest entities of $300 million at both June 30, 2013 and December 31, 2012, respectively. | ||||||||||||||||||||||
At both June 30, 2013 and December 31, 2012, the fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper and non-recourse notes payable of variable interest entities are not materially different from their carrying amounts because of the short-term nature of these instruments and/or because the stated rates approximate market rates.
11. Variable Interest EntitiesVARIABLE INTEREST ENTITIES
A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. The analysis to determine whether an entity is a VIE considers contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity and the relationship of voting power to the amount of equity invested in an entity. This analysis is performed either upon the creation of a legal entity or upon the occurrence of an event requiring reevaluation, such as a significant change in an entity’s assets or activities. If an entity is determined to be a VIE, a qualitative analysis of control determines the party that consolidates a VIE based on what party has the power to direct the most significant activities of the VIE that impact its economic performance as well as what party has rights to receive benefits or is obligated to absorb losses that are significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.
59
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
CONSOLIDATED VIEs
The table below shows the VIEs that Duke Energy and Duke Energy Carolinas consolidate and how these entities impact Duke Energy’s and Duke Energy Carolinas’ respective Condensed Consolidated Balance Sheets. None of these entities are consolidated by Duke Energy Ohio or Duke Energy Indiana.
90
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Other than the discussion below related to CRC, no financial support was provided to any of the consolidated VIEs during the three or six months ended June 30, 20122013 and the year ended December 31, 2011,2012, or is expected to be provided in the future, that was not previously contractually required.
|
|
| June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) |
| DERF(a) |
| CRC |
| CinCapV | Renewables |
| Other |
| Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Receivables of VIEs | Restricted Receivables of VIEs |
| $ | 669 |
| $ | 528 |
| $ | 16 |
| $ | 20 |
| $ | 2 |
| $ | 1,235 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Current Assets | Other Current Assets |
|
| ― |
|
| ― |
|
| 4 |
|
| 183 |
|
| 2 |
|
| 189 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangibles, net | Intangibles, net |
|
| ― |
|
| ― |
|
| ― |
|
| 11 |
|
| ― |
|
| 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Other Assets of VIEs | Restricted Other Assets of VIEs |
|
| ― |
|
| ― |
|
| 44 |
|
| 12 |
|
| 1 |
|
| 57 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets | Other Assets |
|
| ― |
|
| ― |
|
| 11 |
|
| 1 |
|
| ― |
|
| 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, Cost | Property, Plant and Equipment, Cost |
|
| ― |
|
| ― |
|
| ― |
|
| 1,650 |
|
| 16 |
|
| 1,666 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Depreciation and Amortization | Accumulated Depreciation and Amortization |
|
| ― |
|
| ― |
|
| ― |
|
| (137) |
|
| (5) |
|
| (142) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Deferred Debits | Other Deferred Debits |
|
| ― |
|
| ― |
|
| ― |
|
| 33 |
|
| ― |
|
| 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Total Assets |
|
| 669 |
|
| 528 |
|
| 75 |
|
| 1,773 |
|
| 16 |
|
| 3,061 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable | Accounts Payable |
|
| ― |
|
| ― |
|
| ― |
|
| 3 |
|
| ― |
|
| 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Recourse Notes Payable of VIEs | Non-Recourse Notes Payable of VIEs |
|
| ― |
|
| 325 |
|
| ― |
|
| ― |
|
| ― |
|
| 325 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes Accrued | Taxes Accrued |
|
| ― |
|
| ― |
|
| ― |
|
| 4 |
|
| ― |
|
| 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current Maturities of Long-Term Debt | Current Maturities of Long-Term Debt |
|
| ― |
|
| ― |
|
| 14 |
|
| 61 |
|
| ― |
|
| 75 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Current Liabilities | Other Current Liabilities |
|
| ― |
|
| ― |
|
| 5 |
|
| 19 |
|
| ― |
|
| 24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Recourse Long-Term Debt | Non-Recourse Long-Term Debt |
|
| 300 |
|
| ― |
|
| 41 |
|
| 918 |
|
| ― |
|
| 1,259 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Income Taxes | Deferred Income Taxes |
|
| ― |
|
| ― |
|
| ― |
|
| 271 |
|
| ― |
|
| 271 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligations | Asset Retirement Obligations |
|
| ― |
|
| ― |
|
| ― |
|
| 24 |
|
| ― |
|
| 24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities | Other Liabilities |
|
| ― |
|
| ― |
|
| 9 |
|
| 21 |
|
| ― |
|
| 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Total Liabilities |
|
| 300 |
|
| 325 |
|
| 69 |
|
| 1,321 |
|
| ― |
|
| 2,015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Assets of Consolidated VIEs | Net Assets of Consolidated VIEs |
| $ | 369 |
| $ | 203 |
| $ | 6 |
| $ | 452 |
| $ | 16 |
| $ | 1,046 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(a) | (a) | Duke Energy Receivables Finance Company, LLC (DERF) is a wholly owned limited liability company of Duke Energy Carolinas. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| Duke Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
| Receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
| Financing |
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) |
| LLC (DERF)(a) |
| CRC |
| CinCapV |
| Renewables |
| Other |
| Total | (in millions) |
| DERF |
| CRC |
| CinCapV | Renewables |
| Other |
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Receivables of VIEs | Restricted Receivables of VIEs |
| $ | 680 |
| $ | 522 |
| $ | 14 |
| $ | 14 |
| $ | 3 |
| $ | 1,233 | Restricted Receivables of VIEs |
| $ | 637 |
| $ | 534 |
| $ | 15 |
| $ | 16 |
| $ | (1) |
| $ | 1,201 | |||||||||||||||||||||||||||||||||||||||||
Other Current Assets | Other Current Assets |
|
| ― |
|
| ― |
| 2 |
| 118 |
| 7 |
| 127 | Other Current Assets |
|
| ― |
|
| ― |
|
| 4 |
|
| 133 |
|
| 2 |
|
| 139 | |||||||||||||||||||||||||||||||||||||||||||||
Intangibles, net | Intangibles, net |
|
| ― |
|
| ― |
| ― |
| 34 |
| ― |
| 34 | Intangibles, net |
|
| ― |
|
| ― |
|
| ― |
|
| 12 |
|
| ― |
|
| 12 | |||||||||||||||||||||||||||||||||||||||||||||
Restricted Other Assets of VIEs | Restricted Other Assets of VIEs |
|
| ― |
|
| ― |
| 58 |
| 17 |
| 58 |
| 133 | Restricted Other Assets of VIEs |
|
| ― |
|
| ― |
|
| 52 |
|
| 2 |
|
| ― |
|
| 54 | |||||||||||||||||||||||||||||||||||||||||||||
Other Assets | Other Assets |
|
| ― |
|
| ― |
| 11 |
| 2 |
| ― |
| 13 | Other Assets |
|
| ― |
|
| ― |
|
| 10 |
|
| ― |
|
| 2 |
|
| 12 | |||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, Cost | Property, Plant and Equipment, Cost |
|
| ― |
|
| ― |
| ― |
| 1,357 |
| ― |
| 1,357 | Property, Plant and Equipment, Cost |
|
| ― |
|
| ― |
|
| ― |
|
| 1,543 |
|
| 15 |
|
| 1,558 | |||||||||||||||||||||||||||||||||||||||||||||
Accumulated Depreciation and Amortization | Accumulated Depreciation and Amortization |
|
| ― |
|
| ― |
| ― |
| (83) |
| ― |
| (83) | Accumulated Depreciation and Amortization |
|
| ― |
|
| ― |
|
| ― |
|
| (98) |
|
| (5) |
|
| (103) | |||||||||||||||||||||||||||||||||||||||||||||
Other Deferred Debits | Other Deferred Debits |
|
| ― |
|
| ― |
| ― |
| 34 |
| 1 |
| 35 | Other Deferred Debits |
|
| ― |
|
| ― |
|
| ― |
|
| 40 |
|
| ― |
|
| 40 | |||||||||||||||||||||||||||||||||||||||||||||
| Total Assets |
|
| 680 |
|
| 522 |
| 85 |
| 1,493 |
| 69 |
| 2,849 |
| Total Assets |
|
| 637 |
|
| 534 |
|
| 81 |
|
| 1,648 |
|
| 13 |
|
| 2,913 | ||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable | Accounts Payable |
|
| ― |
|
| ― |
| ― |
| 7 |
| 2 |
| 9 | Accounts Payable |
|
| ― |
|
| ― |
|
| ― |
|
| 1 |
|
| ― |
|
| 1 | |||||||||||||||||||||||||||||||||||||||||||||
Non-Recourse Notes Payable |
|
| ― |
|
| 269 |
| ― |
| ― |
| ― |
| 269 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Recourse Notes Payable of VIEs | Non-Recourse Notes Payable of VIEs |
|
| ― |
|
| 312 |
|
| ― |
|
| ― |
|
| ― |
|
| 312 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes Accrued | Taxes Accrued |
|
| ― |
|
| ― |
| ― |
| 3 |
| ― |
| 3 | Taxes Accrued |
|
| ― |
|
| ― |
|
| ― |
|
| 62 |
|
| ― |
|
| 62 | |||||||||||||||||||||||||||||||||||||||||||||
Current Maturities of Long-Term Debt | Current Maturities of Long-Term Debt |
|
| ― |
|
| ― |
| 12 |
| 361 |
| 4 |
| 377 | Current Maturities of Long-Term Debt |
|
| ― |
|
| ― |
|
| 13 |
|
| 459 |
|
| ― |
|
| 472 | |||||||||||||||||||||||||||||||||||||||||||||
Other Current Liabilities | Other Current Liabilities |
|
| ― |
|
| ― |
| 2 |
| 20 |
| 1 |
| 23 | Other Current Liabilities |
|
| ― |
|
| ― |
|
| 4 |
|
| 25 |
|
| ― |
|
| 29 | |||||||||||||||||||||||||||||||||||||||||||||
Non-Recourse Long-Term Debt | Non-Recourse Long-Term Debt |
|
| 300 |
|
| ― |
| 55 |
| 502 |
| 58 |
| 915 | Non-Recourse Long-Term Debt |
|
| 300 |
|
| ― |
|
| 48 |
|
| 504 |
|
| ― |
|
| 852 | |||||||||||||||||||||||||||||||||||||||||||||
Deferred Income Taxes | Deferred Income Taxes |
|
| ― |
|
| ― |
| ― |
| 155 |
| ― |
| 155 | Deferred Income Taxes |
|
| ― |
|
| ― |
|
| ― |
|
| 154 |
|
| ― |
|
| 154 | |||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligations | Asset Retirement Obligations |
|
| ― |
|
| ― |
| ― |
| 18 |
| ― |
| 18 | Asset Retirement Obligations |
|
| ― |
|
| ― |
|
| ― |
|
| 23 |
|
| ― |
|
| 23 | |||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities | Other Liabilities |
|
| ― |
|
| ― |
| 9 |
| 42 |
| ― |
| 51 | Other Liabilities |
|
| ― |
|
| ― |
|
| 10 |
|
| 39 |
|
| ― |
|
| 49 | |||||||||||||||||||||||||||||||||||||||||||||
| Total Liabilities |
|
| 300 |
|
| 269 |
| 78 |
| 1,108 |
| 65 |
| 1,820 |
| Total Liabilities |
|
| 300 |
|
| 312 |
|
| 75 |
|
| 1,267 |
|
| ― |
|
| 1,954 | ||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interests |
|
| ― |
|
| ― |
| ― |
| ― |
| 2 |
| 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Assets of Consolidated VIEs | Net Assets of Consolidated VIEs |
| $ | 380 |
| $ | 253 |
| $ | 7 |
| $ | 385 |
| $ | 2 |
| $ | 1,027 | Net Assets of Consolidated VIEs |
| $ | 337 |
| $ | 222 |
| $ | 6 |
| $ | 381 |
| $ | 13 |
| $ | 959 | |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||
(a) | DERF is a wholly owned limited liability company of Duke Energy Carolinas. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
60
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)DERF
|
|
| December 31, 2011 | ||||||||||||||||
|
|
| Duke Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Financing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(in millions) |
| LLC (DERF)(a) |
| CRC |
| CinCapV |
| Renewables |
| Other |
| Total | |||||||
Restricted Receivables of VIEs |
| $ | 581 |
| $ | 547 |
| $ | 13 |
| $ | 13 |
| $ | 3 |
| $ | 1,157 | |
Other Current Assets |
|
| ― |
|
| ― |
|
| 2 |
|
| 124 |
|
| 8 |
|
| 134 | |
Intangibles, net |
|
| ― |
|
| ― |
|
| ― |
|
| 12 |
|
| ― |
|
| 12 | |
Restricted Other Assets of VIEs |
|
| ― |
|
| ― |
|
| 65 |
|
| 10 |
|
| 60 |
|
| 135 | |
Other Assets |
|
| ― |
|
| ― |
|
| 14 |
|
| 36 |
|
| ― |
|
| 50 | |
Property, Plant and Equipment, Cost |
|
| ― |
|
| ― |
|
| ― |
|
| 913 |
|
| ― |
|
| 913 | |
Accumulated Depreciation and Amortization |
|
| ― |
|
| ― |
|
| ― |
|
| (62) |
|
| ― |
|
| (62) | |
Other Deferred Debits |
|
| ― |
|
| ― |
|
| ― |
|
| 24 |
|
| 2 |
|
| 26 | |
| Total Assets |
|
| 581 |
|
| 547 |
|
| 94 |
|
| 1,070 |
|
| 73 |
|
| 2,365 |
Accounts Payable |
|
| ― |
|
| ― |
|
| ― |
|
| 1 |
|
| 1 |
|
| 2 | |
Non-Recourse Notes Payable |
|
| ― |
|
| 273 |
|
| ― |
|
| ― |
|
| ― |
|
| 273 | |
Taxes Accrued |
|
| ― |
|
| ― |
|
| ― |
|
| 3 |
|
| ― |
|
| 3 | |
Current Maturities of Long-Term Debt |
|
| ― |
|
| ― |
|
| 11 |
|
| 49 |
|
| 5 |
|
| 65 | |
Other Current Liabilities |
|
| ― |
|
| ― |
|
| 3 |
|
| 59 |
|
| ― |
|
| 62 | |
Non-Recourse Long-Term Debt |
|
| 300 |
|
| ― |
|
| 60 |
|
| 528 |
|
| 61 |
|
| 949 | |
Deferred Income Taxes |
|
| ― |
|
| ― |
|
| ― |
|
| 160 |
|
| ― |
|
| 160 | |
Asset Retirement Obligation |
|
| ― |
|
| ― |
|
| ― |
|
| 13 |
|
| ― |
|
| 13 | |
Other Liabilities |
|
| ― |
|
| ― |
|
| 13 |
|
| 37 |
|
| ― |
|
| 50 | |
| Total Liabilities |
|
| 300 |
|
| 273 |
|
| 87 |
|
| 850 |
|
| 67 |
|
| 1,577 |
Noncontrolling Interests |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 1 |
|
| 1 | |
Net Assets of Consolidated VIEs |
| $ | 281 |
| $ | 274 |
| $ | 7 |
| $ | 220 |
| $ | 5 |
| $ | 787 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | DERF is a wholly owned limited liability company of Duke Energy Carolinas. |
DERF.Duke Energy Carolinas securitizes certain accounts receivable through DERF, a bankruptcy remote, special purpose subsidiary. DERF is a wholly owned limited liability company of Duke Energy Carolinas with a separate legal existence from its parent, and its assets are not intended to be generally available to creditors of Duke Energy Carolinas. As a result of the securitization, on a daily basis Duke Energy Carolinas sells certain accounts receivable, arising from the sale of electricity and/or related services, as part of Duke Energy Carolinas’ franchised electric business, to DERF. In order to fund its purchases of accounts receivable, DERF has a $300 million secured credit facility with a commercial paper conduit, which expires in August 2013.2014. Duke Energy Carolinas provides the servicing for the receivables (collecting and applying the cash to the appropriate receivables). Duke Energy Carolinas’ borrowing under the credit facility is limited to the amount of qualified receivables sold, which has been and is expected to be in excess of the amount borrowed, which is maintained at $300 million. The debt is classified as long-term since the facility has an expiration date of greater than one year from the balance sheet date.
The obligations of DERF under the facility are non-recourse to Duke Energy Carolinas. Duke Energy and its subsidiaries have no requirement to provide liquidity, purchase assets of DERF or guarantee performance. DERF is considered a VIE because the equity capitalization is insufficient to support its operations. If deficiencies in the net worth of DERF were to occur, those deficiencies would be cured through funding
91
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
from Duke Energy Carolinas. In addition, the most significant activity that impacts the economic performance of DERF relates to the decisions made with respect to the management of delinquent receivables. Since those decisions are made by Duke Energy Carolinas and any net worth deficiencies of DERF would be cured through funding from Duke Energy Carolinas, Duke Energy Carolinas consolidates DERF.
CRC.
CRC was formed in order to secure low cost financing for Duke Energy Ohio including Duke Energy Kentucky, and Duke Energy Indiana. Duke Energy Ohio and Duke Energy Indiana sell on a revolving basis at a discount, nearly all of their customer accounts receivable and related collections to CRC. The receivables which are sold are selected in order to avoid any significant concentration of credit risk and exclude delinquent receivables. The receivables sold are securitized by CRC through a facility managed by two unrelated third parties and the receivables are used as collateral for commercial paper issued by the unrelated third parties. These loans provide the cash portion of the proceeds paid by CRC to Duke Energy Ohio and Duke Energy Indiana. The proceeds obtained by Duke Energy Ohio and Duke Energy Indiana from the sales of receivables are cash and a subordinated note from CRC (subordinated retained interest in the sold receivables) for a portion of the purchase price (typically approximates 25%25 percent of the total proceeds). The amount borrowed by CRC against these receivables is non-recourse to the general credit of Duke Energy, and the associated cash collections from the accounts receivable sold isare the sole source of funds to satisfy the related debt obligation. Borrowing is limited to approximately 75%75 percent of the transferred receivables. Losses on collection in excess of the discount are first absorbed by the equity of CRC and next by the subordinated retained interests held by Duke Energy Ohio and Duke Energy Indiana. The discount on the receivables reflects interest expense plus an allowance for bad debts net of a servicing fee charged by Duke Energy Ohio and Duke Energy Indiana. Duke Energy Ohio and Duke Energy Indiana are responsible for the servicing of the receivables (collecting and applying the cash to the appropriate receivables). Depending on the experience with collections, additional equity infusions to CRC may be required to be made by Duke Energy in order to maintain a minimum equity balance of $3 million. There were no equity infusions to CRC during the three or six months ended June 30, 2012. During the six months ended June 30, 2011, Duke Energy infused $6 million of equity to Cinergy receivables to remedy net worth deficiencies.2013 and 2012, respectively. The amount borrowed fluctuates based on the amount of receivables sold. The debt is
61
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
short term because the facility has an expiration date of less than one year from the balance sheet date. The current expiration date is October 2012.November 2013. CRC is considered a VIE because the equity capitalization is insufficient to support its operations, the power to direct the most significant activities that impact the economic performance of the entity are not performed by the equity holder, Cinergy Corp. (Cinergy), and deficiencies in the net worth of CRC are not funded by Cinergy, but by Duke Energy. The most significant activity of CRC relates to the decisions made with respect to the management of delinquent receivables. These decisions, as well as the requirement to make up deficiencies in net worth, are made by Duke Energy and not by Duke Energy Ohio Duke Energy Kentucky or Duke Energy Indiana. Thus, Duke Energy consolidates CRC. Duke Energy Ohio and Duke Energy Indiana do not consolidate CRC.
CinCap V. V
CinCap V was created to finance and execute a power sale agreement with Central Maine Power Company for approximately 35 MW of capacity and energy. This agreement expires in 2016. CinCap V is considered a VIE because the equity capitalization is insufficient to support its operations. As Duke Energy has the power to direct the most significant activities that impact the economic performance of the entity, which are the decisions to hedge and finance the power sales agreement, CinCap V is consolidated by Duke Energy.
Renewables.Renewables
Certain of Duke Energy’s renewable energy facilities include Green Frontier Windpower, LLC, Top of The World Wind Energy LLC, DS Cornerstone LLC, and various solar projects, all subsidiaries of DEGS, an indirect wholly owned subsidiary of Duke Energy.
Green Frontier Windpower, LLC, Top of the World Wind Energy, LLC and the various solar projects are VIEs due to power purchase agreements with terms that approximate the expected life of the projects. These fixed price agreements effectively transfer the commodity price risk to the buyer of the power. Certain other of Duke Energy’s renewable energy facilities are VIEs due to Duke Energy issuing debt service reserve guarantees and operations and maintenance reserve guarantees in support of debt financings. Duke Energy has consolidated these entities since inception because the most significant activities that impact the economic performance of these renewable energy facilities were the decisions associated with the siting, negotiation of the purchase power agreement, engineering, procurement and construction, and decisions associated with ongoing operations and maintenance related activities, all of which were made solely by Duke Energy.
DS Cornerstone, LLC, a 50/50 joint venture entity with a third-party joint venture partner, owns two windpower projects and has executed a third party financing against the two windpower projects. DS Cornerstone is currently a VIE as the members equity is not sufficient as of the June 30, 2012 to support the operations of the joint venture as demonstrated by the third party financing. Duke Energy provided a Production Tax Credit (PTC) Remedy Agreement to the joint venture partner whereby Duke Energy has guaranteed the two windpower projects will achieve commercial operation in 2012 and an agreed to number of wind turbines will qualify for production tax credits. In the event the agreed to number of wind turbines of the two wind generating facilities fail to qualify, the joint venture partner has the option to put its equity ownership interest back to Duke Energy. The PTC Remedy Agreement results in greater loss exposure to Duke Energy and, as a result, Duke Energy will consolidate DS Cornerstone, LLC until both projects reach commercial operation in 2012 and the appropriate number of wind turbines qualify for PTC.
The debt held by these renewable energy facilities is non-recourse to the general credit of Duke Energy. Duke Energy and its subsidiaries have no requirement to provide liquidity or purchase the assets of these renewable energy facilities. Duke Energy does not guarantee performance except for the production tax credit guarantee mentioned above, an immaterial multi-purpose letter of credit and various immaterial debt service reserve and operations and maintenance reserve guarantees. The assets are restricted and they cannot be pledged as collateral or sold to third parties without the prior approval of the debt holders.
Other. Duke Energy has other VIEs with restricted assets and non-recourse debt. These VIEs include certain on-site power generation facilities. Duke Energy consolidates these particular on-site power generation entities because Duke Energy has the power to direct the majority of the most significant activities, which, most notably involve the oversight of operation and maintenance related activities that impact the economic performance of these entities.
NON-CONSOLIDATED VIEs
The tables below show the VIEs that the Duke Energy Registrants do not consolidate and how these entities impact the Duke Energy Registrants respective Condensed Consolidated Balance Sheets. As discussed above, while Duke Energy consolidated CRC, Duke Energy Ohio and Duke Energy Indiana do not consolidate CRC as they are not the primary beneficiary.
|
|
| June 30, 2012 | ||||||||||||||||
|
|
|
| Duke Energy |
| Duke Energy |
| Duke Energy | |||||||||||
(in millions) |
| DukeNet |
| Renewables |
| Other |
| Total |
| Ohio |
| Indiana | |||||||
Receivables |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | 101 |
| $ | 143 | |
Investments in equity method unconsolidated affiliates |
|
| 122 |
|
| 79 |
|
| 25 |
|
| 226 |
|
| ― |
|
| ― | |
Intangibles |
|
| ― |
|
|
|
|
| 108 |
|
| 108 |
|
| 108 |
|
| ― | |
| Total Assets |
|
| 122 |
|
| 79 |
|
| 133 |
|
| 334 |
|
| 209 |
|
| 143 |
Other Current Liabilities |
|
| ― |
|
| ― |
|
| 3 |
|
| 3 |
|
| ― |
|
| ― | |
Deferred Credits and Other Liabilities |
|
| ― |
|
| ― |
|
| 17 |
|
| 17 |
|
| ― |
|
| ― | |
| Total Liabilities |
|
| ― |
|
| ― |
|
| 20 |
|
| 20 |
|
| ― |
|
| ― |
Net Assets |
| $ | 122 |
| $ | 79 |
| $ | 113 |
| $ | 314 |
| $ | 209 |
| $ | 143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| December 31, 2011 |
|
|
| June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| Duke Energy |
| Duke Energy |
| Duke Energy |
|
|
|
| Duke Energy |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) |
| DukeNet |
| Renewables |
| Other |
| Total |
| Ohio |
| Indiana | (in millions) |
| DukeNet | Renewables |
| Other |
| Total |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables | Receivables |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | 129 |
| $ | 139 | Receivables |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | 82 |
| $ | 110 | ||||||||||||||||||||||||||||||||||||||
Investments in equity method unconsolidated affiliates | Investments in equity method unconsolidated affiliates |
| 129 |
| 81 |
| 25 |
| 235 |
| ― |
| ― | Investments in equity method unconsolidated affiliates |
|
| 114 |
|
| 158 |
|
| 29 |
|
| 301 |
|
| ― |
|
| ― | ||||||||||||||||||||||||||||||||||||||||||||
Intangibles | Intangibles |
| ― |
| ― |
| 111 |
| 111 |
| 111 |
| ― | Intangibles |
|
| ― |
|
| ― |
|
| 100 |
|
| 100 |
|
| 100 |
|
| ― | ||||||||||||||||||||||||||||||||||||||||||||
Investments and other assets | Investments and other assets |
|
| ― |
|
| ― |
|
| 4 |
|
| 4 |
|
| ― |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Assets |
| 129 |
| 81 |
| 136 |
| 346 |
| 240 |
| 139 |
| Total assets |
|
| 114 |
|
| 158 |
|
| 133 |
|
| 405 |
|
| 182 |
|
| 110 | |||||||||||||||||||||||||||||||||||||||||||
Other Current Liabilities |
| ― |
| ― |
| 3 |
| 3 |
| ― |
| ― | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Credits and Other Liabilities |
| ― |
| ― |
| 18 |
| 18 |
| ― |
| ― | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other current liabilities | Other current liabilities |
|
| ― |
|
| ― |
|
| 3 |
|
| 3 |
|
| ― |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred credits and other liabilities | Deferred credits and other liabilities |
|
| ― |
|
| ― |
|
| 16 |
|
| 16 |
|
| ― |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Liabilities |
| ― |
| ― |
| 21 |
| 21 |
| ― |
| ― |
| Total liabilities |
|
| ― |
|
| ― |
|
| 19 |
|
| 19 |
|
| ― |
|
| ― | |||||||||||||||||||||||||||||||||||||||||||
Net Assets |
| $ | 129 |
| $ | 81 |
| $ | 115 |
| $ | 325 |
| $ | 240 |
| $ | 139 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | Net assets |
| $ | 114 |
| $ | 158 |
| $ | 114 |
| $ | 386 |
| $ | 182 |
| $ | 110 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
6292
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
|
|
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
| Duke Energy |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| DukeNet | Renewables |
| FPC Capital I Trust(a) |
| Other |
| Total |
|
| ||||||||||||||||||||||||||||||||||||||
Receivables |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | 97 |
| $ | 116 | ||||||||||||||||||||||||||||
Investments in equity method unconsolidated affiliates |
|
| 118 |
|
| 147 |
|
| ― |
|
| 27 |
|
| 292 |
|
| ― |
|
| ― | ||||||||||||||||||||||||||||
Intangibles |
|
| ― |
|
| ― |
|
| ― |
|
| 104 |
|
| 104 |
|
| 104 |
|
| ― | ||||||||||||||||||||||||||||
Investments and other assets |
|
| ― |
|
| ― |
|
| 9 |
|
| 2 |
|
| 11 |
|
| ― |
|
| ― | ||||||||||||||||||||||||||||
| Total assets |
|
| 118 |
|
| 147 |
|
| 9 |
|
| 133 |
|
| 407 |
|
| 201 |
|
| 116 | |||||||||||||||||||||||||||
Other current liabilities |
|
| ― |
|
| ― |
|
| ― |
|
| 3 |
|
| 3 |
|
| ― |
|
| ― | ||||||||||||||||||||||||||||
Deferred credits and other liabilities |
|
| ― |
|
| ― |
|
| 319 |
|
| 17 |
|
| 336 |
|
| ― |
|
| ― | ||||||||||||||||||||||||||||
| Total liabilities |
|
| ― |
|
| ― |
|
| 319 |
|
| 20 |
|
| 339 |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Net assets (liabilities) |
| $ | 118 |
| $ | 147 |
| $ | (310) |
| $ | 113 |
| $ | 68 |
| $ | 201 |
| $ | 116 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
(a) | The entire balance of Investments and other assets and $274 million of the Deferred credits and other liabilities balance applies to Progress Energy. | ||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||
No financial support that was not previously contractually required was provided to any of the unconsolidated VIEs during the three or six months ended June 30, 20122013 and 2011,2012, respectively, or is expected to be provided in the future.
With the exception of the power purchase agreement with the Ohio Valley Electric Corporation (OVEC), which is discussed below, and various guarantees, reflected in the table above as “Deferred CreditsDeferred credits and Other Liabilities”,other liabilities, the Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above.
DukeNet
Duke Energy owns a 50 percent ownership interest in DukeNet. DukeNet has a 5-year, $150 million senior secured credit facility with a syndicate of ten external financial institutions. This credit facility is non-recourse to Duke Energy. DukeNet is considered a VIE because it has entered into certain contractual arrangements that provide DukeNet with additional forms of subordinated financial support. The most significant activities that impact DukeNet’s economic performance relate to its business development and fiber optic capacity marketing and management activities. The power to direct these activities is jointly and equally shared by Duke Energy and the other joint venture partner. As a result, Duke Energy does not consolidate DukeNet. Accordingly, DukeNet is a non-consolidated VIE that is reported as an equity method investment.
Unless consent by Duke Energy is given, Duke Energy and its subsidiaries have no requirement to provide liquidity, purchase the assets of DukeNet, or guarantee performance.
Renewables
Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs which are not consolidated because the power to direct and control key activities is shared jointly. Instead, Duke Energy’s investment is recorded under the equity method of accounting. These entities are VIEs due to power purchase agreements with terms that approximate the expected life of the project. These fixed price agreements effectively transfer the commodity price risk to the buyer of the power.
FPC Capital I Trust
At December 31, 2012, Progress Energy had variable interests in the FPC Capital I Trust (the Trust) which was a VIE of which Duke Energy was not the primary beneficiary. The Trust, a finance subsidiary, was established in 1999 for the sole purpose of issuing $300 million of 7.10% QUIPS due 2039, and used the proceeds thereof to purchase from Florida Progress Funding Corporation (Funding Corp.), a wholly owned subsidiary of Progress Energy, $300 million of 7.10% Junior Subordinated Deferrable Interest Notes due 2039. The Trust had no other operations and its sole assets were the subordinated notes and related guarantees. Funding Corp. was formed for the sole purpose of providing financing to Duke Energy Florida. Funding Corp. did not engage in business activities other than such financing and had no independent operations. Progress Energy guaranteed the payments of all distributions required by the Trust. On February 1, 2013, Duke Energy redeemed the $300 million of 7.10% QUIPS and subsequently terminated the Trust.
Other
Duke Energy has investments in various other entities that are VIEs which are not consolidated. The most significant of these investments is Duke Energy Ohio’s 9 percent ownership interest in OVEC. Through its ownership interest in OVEC, Duke Energy Ohio has a contractual arrangement through June 2040 to buy power from OVEC’s power plants. The proceeds from the sale of power by OVEC to its power purchase agreement counterparties, including Duke Energy Ohio, are designed to be sufficient for OVEC to meet its operating expenses, fixed costs, debt amortization and interest expense, as well as earn a ROE. Accordingly, the value of this contract is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business, including costs associated with its 2,256 MW of coal-fired generation
93
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
capacity. As discussed in Note 5, the proposed rulemaking on cooling water intake structures, MATS, CSAPR and CCP’s could increase the costs of OVEC which would be passed through to Duke Energy Ohio. The initial carrying value of this contract was recorded as an intangible asset when Duke Energy acquired Cinergy in April 2006. In addition, the company has guaranteed the performance of certain entities in which the company no longer has an equity interest. As a result, the company has a variable interest in certain other VIEs that are not consolidated.
CRC.
As discussed above, CRC is consolidated only by Duke Energy. Accordingly, the retained interest in the sold receivables recorded on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana are eliminated in consolidation at Duke Energy.
The proceeds obtained from the sales of receivables are largely cash but do include a subordinated note from CRC for a portion of the purchase price (typically approximates 25%25 percent of the total proceeds). The subordinated note is a retained interest (right to receive a specified portion of cash flows from the sold assets) and is classified within Receivables in Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Balance Sheets.Sheets at June 30, 2013 and December 31, 2012, respectively. The retained interests reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana approximate fair value.
The carrying values of the retained interests are determined by allocating the carrying value of the receivables between the assets sold and the interests retained based on relative fair value. Because the receivables generally turnover in less than two months, credit losses are reasonably predictable due to the broad customer base and lack of significant concentration, and the purchased beneficial interest (equity in CRC) is subordinate to all retained interests and thus would absorb losses first, the allocated basis of the subordinated notes are not materially different than their face value. The hypothetical effect on the fair value of the retained interests assuming both a 10%10 percent and a 20%20 percent unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. Interest accrues to Duke Energy Ohio Duke Energy Indiana and Duke Energy KentuckyIndiana on the retained interests using the accretableacceptable yield method, which generally approximates the stated rate on the notes since the allocated basis and the face value are nearly equivalent. An impairment charge is recorded against the carrying value of both the retained interests and purchased beneficial interest whenever it is determined that an other-than-temporary impairment has occurred. The key assumptions used in estimating the fair value in 2013 and 2012 and 2011 isare detailed in the following table:
table.
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| Duke Energy Ohio |
| Duke Energy Indiana |
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| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
|
| 2013 |
| 2012 |
| 2013 |
| 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Anticipated credit loss ratio |
| 0.8 | % |
| 0.8 | % |
| 0.4 | % |
| 0.4 | % | Anticipated credit loss ratio |
| 0.6 | % |
| 0.7 | % |
| 0.3 | % |
| 0.3 | % | ||||||||||||||||||||||||||||||||||||||||||||
Discount rate |
| 1.3 | % |
| 2.6 | % |
| 1.3 | % |
| 2.6 | % | Discount rate |
| 1.2 | % |
| 1.2 | % |
| 1.2 | % |
| 1.2 | % | ||||||||||||||||||||||||||||||||||||||||||||
Receivable turnover rate |
| 12.7 | % |
| 12.7 | % |
| 10.2 | % |
| 10.2 | % | Receivable turnover rate |
| 12.8 | % |
| 12.7 | % |
| 10.3 | % |
| 10.2 | % | ||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table shows the gross and net receivables sold. | The following table shows the gross and net receivables sold. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) | June 30, 2013 | December 31, 2012 |
| June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables sold | Receivables sold |
| $ | 257 |
| $ | 282 |
|
| $ | 312 |
| $ | 289 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Less: Retained interests | Less: Retained interests |
|
| 82 |
|
| 97 |
|
|
| 110 |
|
| 116 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net receivables sold | Net receivables sold |
| $ | 175 |
| $ | 185 |
|
| $ | 202 |
| $ | 173 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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The following tables show the retained interests, sales, and cash flows related to receivables sold. | The following tables show the retained interests, sales, and cash flows related to receivables sold. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The following table shows the gross and net receivables sold: |
|
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| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
| Duke Energy Ohio |
| Duke Energy Indiana |
|
| Three Months Ended June 30, |
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) |
| June 30, 2012 |
| December 31, 2011 |
| June 30, 2012 |
| December 31, 2011 | (in millions) |
| 2013 |
| 2012 |
|
| 2013 |
| 2012 | |||||||||||||||||||||||||||||||||||||||||||||||
Sales | Sales |
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables sold | Receivables sold |
| $ | 251 |
| $ | 302 |
| $ | 307 |
| $ | 279 | Receivables sold |
| $ | 512 |
| $ | 490 |
|
| $ | 702 |
| $ | 701 | |||||||||||||||||||||||||||||||||||||||
Less: Retained interests |
|
| 102 |
|
| 129 |
|
| 143 |
|
| 139 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net receivables sold |
| $ | 149 |
| $ | 173 |
| $ | 164 |
| $ | 140 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss recognized on sale | Loss recognized on sale |
|
| 3 |
|
| 3 |
|
|
| 3 |
|
| 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash flows | Cash flows |
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Cash proceeds from receivables sold | Cash proceeds from receivables sold |
|
| 539 |
|
| 484 |
|
|
| 721 |
|
| 673 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Collection fees received | Collection fees received |
|
| 1 |
|
| 1 |
|
|
| 1 |
|
| 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Return received on retained interests | Return received on retained interests |
|
| 2 |
|
| 1 |
|
|
| 1 |
|
| 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| The following tables show the retained interests, sales, and cash flows related to receivables sold: |
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| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||
|
|
| Three Months Ended June 30, |
| Three Months Ended June 30, | ||||||||
(in millions) |
| 2012 |
| 2011 |
| 2012 |
| 2011 | |||||
Sales |
|
|
|
|
|
|
|
|
|
|
|
| |
Receivables sold |
| $ | 490 |
| $ | 521 |
| $ | 701 |
| $ | 630 | |
Loss recognized on sale |
| $ | 3 |
| $ | 5 |
| $ | 3 |
| $ | 4 | |
Cash flows |
|
|
|
|
|
|
|
|
|
|
|
| |
Cash proceeds from receivables sold |
| $ | 484 |
| $ | 560 |
| $ | 673 |
| $ | 646 | |
Collection fees received |
| $ | 1 |
| $ | ― |
| $ | 1 |
| $ | ― | |
Return received on retained interests |
| $ | 1 |
| $ | 3 |
| $ | 1 |
| $ | 3 |
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||
|
|
| Duke Energy Ohio |
| Duke Energy Indiana |
|
| Duke Energy Ohio |
| Duke Energy Indiana | |||||||||||||||||||||||||||||||||||||||||||
|
|
| Six Months Ended June 30, |
| Six Months Ended June 30, |
|
| Six Months Ended June 30, |
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) |
| 2012 |
| 2011 |
| 2012 |
| 2011 | (in millions) | 2013 |
| 2012 |
| 2013 |
| 2012 | ||||||||||||||||||||||||||||||||||||
Sales | Sales |
|
|
|
|
|
|
|
|
| Sales |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Receivables sold | Receivables sold |
| $ | 1,100 |
| $ | 1,240 |
| $ | 1,407 |
| $ | 1,298 | Receivables sold |
| $ | 1,150 |
| $ | 1,100 |
|
| $ | 1,449 |
| $ | 1,407 | ||||||||||||||||||||||||||
Loss recognized on sale | Loss recognized on sale |
| $ | 7 |
| $ | 11 |
| $ | 6 |
| $ | 8 | Loss recognized on sale |
|
| 6 |
|
| 7 |
|
|
| 6 |
|
| 6 | ||||||||||||||||||||||||||
Cash flows | Cash flows |
|
|
|
|
|
|
|
|
| Cash flows |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Cash proceeds from receivables sold | Cash proceeds from receivables sold |
| $ | 1,120 |
| $ | 1,337 |
| $ | 1,397 |
| $ | 1,355 | Cash proceeds from receivables sold |
|
| 1,156 |
|
| 1,120 |
|
|
| 1,446 |
|
| 1,397 | ||||||||||||||||||||||||||
Collection fees received | Collection fees received |
| $ | 1 |
| $ | - |
| $ | 1 |
| $ | ― | Collection fees received |
|
| 1 |
|
| 1 |
|
|
| 1 |
|
| 1 | ||||||||||||||||||||||||||
Return received on retained interests | Return received on retained interests |
| $ | 3 |
| $ | 7 |
| $ | 3 |
| $ | 7 | Return received on retained interests |
|
| 3 |
|
| 3 |
|
|
| 3 |
|
| 3 | ||||||||||||||||||||||||||
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6394
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
Cash flows from the sale of receivables are reflected within Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows.
Collection fees received in connection with the servicing of transferred accounts receivable are included in Operation, Maintenance and Other on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Operations.Operations and Comprehensive Income. The loss recognized on the sale of receivables is calculated monthly by multiplying the receivables sold during the month by the required discount which is derived monthly utilizing a three year weighted average formula that considers charge-off history, late charge history, and turnover history on the sold receivables, as well as a component for the time value of money. The discount rate, or component for the time value of money, is calculated monthly by summing the prior month-end LIBORLondon Interbank Offered Rate (LIBOR) plus a fixed rate of 1.00% as of June 30, 2012, as compared to prior month-end LIBOR plus 2.39% as of June 30, 2011.
DukeNet1.00 percent.. In 2010, Duke Energy sold a 50% ownership interest in DukeNet to Alinda. The sale resulted in DukeNet becoming a joint venture with Duke Energy and Alinda each owning a 50% interest. In connection with the formation of the new DukeNet joint venture, a five-year, $150 million senior secured credit facility was executed with a syndicate of ten external financial institutions. This credit facility is non-recourse to Duke Energy. DukeNet is considered a VIE because it has entered into certain contractual arrangements that provide DukeNet with additional forms of subordinated financial support. The most significant activities that impact DukeNet’s economic performance relate to its business development and fiber optic capacity marketing and management activities. The power to direct these activities is jointly and equally shared by Duke Energy and Alinda. As a result, Duke Energy does not consolidate the DukeNet joint venture. Accordingly, DukeNet is a non-consolidated VIE that is reported as an equity method investment.
Unless consent by Duke Energy is given otherwise, Duke Energy and its subsidiaries have no requirement to provide liquidity, purchase the assets of DukeNet, or guarantee performance.
Renewables. Duke Energy has investments in various entities that generate electricity through the use of renewable energy technology. Some of these entities, which were part of the Catamount acquisition, are VIEs which are not consolidated due to the joint ownership of the entities when they were created and the power to direct and control key activities is shared jointly Instead, Duke Energy’s investment is recorded under the equity method of accounting. These entities are VIEs due to power purchase agreements with terms that approximate the expected life of the project. These fixed price agreements effectively transfer the commodity price risk to the buyer of the power.
Other. Duke Energy has investments in various other entities that are VIEs which are not consolidated. The most significant of these investments is Duke Energy Ohio’s 9% ownership interest in OVEC. Through its ownership interest in OVEC, Duke Energy Ohio has a contractual arrangement through June 2040 to buy power from OVEC’s power plants. The proceeds from the sale of power by OVEC to its power purchase agreement counterparties, including Duke Energy Ohio, are designed to be sufficient for OVEC to meet its operating expenses, fixed costs, debt amortization and interest expense, as well as earn a return on equity. Accordingly, the value of this contract is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business, including costs associated with its 2,256 megawatts of coal-fired generation capacity. As discussed in Note 5, the proposed rulemaking on cooling water intake structures, MATS, CSAPR and CCP’s could increase the costs of OVEC which would be passed through to Duke Energy Ohio. The initial carrying value of this contract was recorded as an intangible asset when Duke Energy acquired Cinergy in April 2006.
In addition, the company has guaranteed the performance of certain entities in which the company no longer has an equity interest. As a result, the company has a variable interest in certain other VIEs that are non-consolidated.
12. Earnings Per Common ShareEARNINGS PER COMMON SHARE (EPS)
Basic Earnings Per Share (EPS) is computed by dividing net income attributable to Duke Energy common shareholders, adjusted for distributed and undistributed earnings allocated to participating securities, by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income attributable to Duke Energy common shareholders, as adjusted for distributed and undistributed earnings allocated to participating securities, by the diluted weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options, phantom shares and stock-based performance unit awards were exercised or settled.
On July 2, 2012, just prior to the close of the merger with Progress Energy, Duke Energy executed a one-for-three reverse stock split. All earnings per share amounts included in this 10-Q are presented as if the one-for-three reverse stock split had been effective January 1, 2011. The following table which includes the effects of the reverse stock split, illustratespresents Duke Energy’s basic and diluted EPS calculations and reconciles the weighted-average number of common shares outstanding to the diluted weighted-average number of common shares outstanding:
outstanding.
64
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| |||
(In millions, except per-share amounts) | Income |
| Average Shares |
|
| EPS | ||||||
Three Months Ended June 30, 2013 |
|
|
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|
|
|
|
| ||||
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic and diluted | $ | 340 |
|
| 706 |
| $ | 0.48 | ||||
Three Months Ended June 30, 2012 |
|
|
|
|
|
|
|
| ||||
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic and diluted | $ | 444 |
|
| 446 |
| $ | 0.99 | ||||
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(In millions, except per-share amounts) | Income |
| Average Shares |
|
| EPS | ||||||
Six Months Ended June 30, 2013 |
|
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|
|
|
|
| ||||
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic | $ | 969 |
|
| 705 |
| $ | 1.37 | ||||
Effect of dilutive securities: |
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|
|
|
|
|
|
| ||||
Stock options, performance and restricted stock |
| ― |
|
| 1 |
|
|
| ||||
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — diluted | $ | 969 |
|
| 706 |
| $ | 1.37 | ||||
Six Months Ended June 30, 2012 |
|
|
|
|
|
|
|
| ||||
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic and diluted | $ | 736 |
|
| 446 |
| $ | 1.65 | ||||
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| |||
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
|
|
|
|
| Average |
|
|
| |
(in millions, except per-share amounts) | Income |
| Shares |
|
| EPS | |||
Three Months Ended June 30, 2012 |
|
|
|
|
|
|
|
| |
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic | $ | 444 |
|
| 446 |
| $ | 0.99 | |
Effect of dilutive securities: |
|
|
|
|
|
|
|
| |
Stock options, performance and restricted stock |
|
|
|
| ― |
|
|
| |
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — diluted | $ | 444 |
|
| 446 |
| $ | 0.99 | |
Three Months Ended June 30, 2011 |
|
|
|
|
|
|
|
| |
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic | $ | 434 |
|
| 444 |
| $ | 0.98 | |
Effect of dilutive securities: |
|
|
|
|
|
|
|
| |
Stock options, performance and restricted stock |
|
|
|
| ― |
|
|
| |
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — diluted | $ | 434 |
|
| 444 |
| $ | 0.98 |
|
|
|
|
| Average |
|
|
| |
(In millions, except per-share amounts) | Income |
| Shares |
| EPS | ||||
Six Months Ended June 30, 2012 |
|
|
|
|
|
|
|
| |
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic | $ | 736 |
|
| 446 |
| $ | 1.65 | |
Effect of dilutive securities: |
|
|
|
|
|
|
|
| |
Stock options, performance and restricted stock |
|
|
|
| ― |
|
|
| |
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — diluted | $ | 736 |
|
| 446 |
| $ | 1.65 | |
Six Months Ended June 30, 2011 |
|
|
|
|
|
|
|
| |
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic | $ | 944 |
|
| 444 |
| $ | 2.13 | |
Effect of dilutive securities: |
|
|
|
|
|
|
|
| |
Stock options, performance and restricted stock |
|
|
|
| ― |
|
|
| |
Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — diluted | $ | 944 |
|
| 444 |
| $ | 2.13 |
As of June 30, 2013 and 2012, and 2011, 42 million and 24 million, respectively, of stock options and performance and unvested stock awards were not included in the “effect of dilutive securities”securities calculation in the above table because either the option exercise prices were greater than the average market price of the common shares during those periods, or performance measures related to the awards had not yet been met.
13. Stock-Based CompensationSTOCK-BASED COMPENSATION
For employee awards, equity classified stock-based compensation cost is measured at the service inception date or the grant date, based on the estimated achievement of certain performance metrics or the fair value of the award, and is recognized as expense or capitalized as a component of property, plant and equipment over the requisite service period.
Duke Energy recorded pre-taxpretax stock-based compensation expense for the three and six months ended June 30, 2012 and 2011 as follows:
follows.
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
| June 30, |
| June 30, | ||||||||
(in millions) | 2012 |
| 2011 |
| 2012 |
| 2011 | |||||
Stock Options | $ | ― |
| $ | ― |
| $ | 2 |
| $ | 2 | |
Restricted Stock Unit Awards |
| 6 |
|
| 6 |
|
| 14 |
|
| 14 | |
Performance Awards |
| 5 |
|
| 5 |
|
| 3 |
|
| 11 | |
Total(a)(b)(c)(d) | $ | 11 |
| $ | 11 |
| $ | 19 |
| $ | 27 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Excludes stock-based compensation cost capitalized of $1 million for each of the three months ended June 30, 2012 and 2011. | |||||||||||
(b) | Excludes stock-based compensation cost capitalized of $1 million and $2 million for the six months ended June 30, 2012 and 2011, respectively. | |||||||||||
(c) | The tax benefit associated with the recorded expense was $4 million and $5 million for the three months ended June 30, 2012 and 2011, respectively. | |||||||||||
(d) | The tax benefit associated with the recorded expense was $7 million and $11 million for the six months ended June 30, 2012 and 2011, respectively. |
|
|
|
|
|
|
|
| ||||||
|
| Three Months Ended June 30, | |||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | |||||||
Restricted Stock Unit Awards |
| $ | 12 |
| $ | 6 | |||||||
Performance Awards |
|
| 7 |
|
| 5 | |||||||
Total |
| $ | 19 |
| $ | 11 | |||||||
Tax benefit associated with stock-based compensation expense |
| $ | 8 |
| $ | 4 | |||||||
Stock-based compensation costs capitalized |
|
| 1 |
|
| 1 | |||||||
|
|
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| ||||||
|
|
|
|
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|
| ||||||
|
| Six Months Ended June 30, | |||||||||||
(in millions) |
|
| 2013 |
|
| 2012 | |||||||
Stock Options |
| $ | 2 |
| $ | 2 | |||||||
Restricted Stock Unit Awards |
|
| 26 |
|
| 14 | |||||||
Performance Awards |
|
| 18 |
|
| 3 | |||||||
Total |
| $ | 46 |
| $ | 19 | |||||||
Tax benefit associated with stock-based compensation expense |
| $ | 18 |
| $ | 7 | |||||||
Stock-based compensation costs capitalized |
|
| 2 |
|
| 1 | |||||||
|
|
|
|
|
|
|
| ||||||
6595
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
14. Employee Benefit ObligationsEMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy and its subsidiaries (including legacy Progress Energy and Cinergy businesses) maintain, and the Subsidiary Registrants participate in, qualified, non-contributory defined benefit retirement plans. Duke Energy also maintains, and the Subsidiary Registrants participate in, non-qualified, non-contributory defined benefit retirement plans, which cover certain executives.
Net periodic benefit costs disclosed in the tables below for the qualified pension, non-qualified pension and other post-retirement benefit plans represent the cost of the respective benefit plan to the Duke Energy Registrants for the periods presented. However, portions of the net periodic benefit costs disclosed in the tables below have been capitalized as a component of property, plant and equipment.
Each ofAmounts presented in the tables below for the Subsidiary Registrants participate in qualifiedrepresent allocated amounts of pension plans, non-qualified pension plans and other post-retirement benefit plans sponsored by Duke Energy. The net periodic benefit costs shown in the tables below represent the allocated cost for employees of the respective benefit plan for the periods presented.Subsidiary Registrants. Additionally, the Subsidiary Registrants are allocated their proportionate share of pension and other post-retirement benefit cost for employees of Duke Energy’s shared services affiliateaffiliates that provide support to the respective Subsidiary Registrant.Registrants. These allocated amounts are included in the governance and shared servicesservice costs for each Subsidiary Registrant discussed in Note 17.
Duke Energy
The following table shows the components of the net periodic benefit costs for the Duke Energy U.S. qualified pension, non-qualified pension and other post-retirement benefit plans.
|
| Three Months Ended |
| Three Months Ended | |||||||||||||
|
| June 30, 2012 |
| June 30, 2011 | |||||||||||||
(in millions) | Qualified Pension Plans(a) | Non-Qualified Pension Plans |
| Other Post-Retirement Benefit Plans(b) |
| Qualified Pension Plans(a) |
| Non-Qualified Pension Plans |
| Other Post-Retirement Benefit Plans(b) | |||||||
Service cost | $ | 22 | $ | ― |
| $ | 1 |
| $ | 24 |
| $ | 1 |
| $ | 3 | |
Interest cost on projected benefit obligation |
| 59 |
| 1 |
|
| 9 |
|
| 58 |
|
| 2 |
|
| 9 | |
Expected return on plan assets |
| (94) |
| ― |
|
| (4) |
|
| (96) |
|
| ― |
|
| (4) | |
Amortization of prior service cost (credit) |
| 2 |
| 1 |
|
| (2) |
|
| 1 |
|
| ― |
|
| (2) | |
Amortization of net transition liability |
| ― |
| ― |
|
| 2 |
|
| ― |
|
| ― |
|
| 2 | |
Amortization of loss (gain) |
| 25 |
| 1 |
|
| (1) |
|
| 19 |
|
| ― |
|
| (1) | |
Other |
| 1 |
| ― |
|
| ― |
|
| 5 |
|
| ― |
|
| ― | |
Net periodic costs | $ | 15 | $ | 3 |
| $ | 5 |
| $ | 11 |
| $ | 3 |
| $ | 7 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Excludes regulatory asset amortization of $4 million and $3 million for each of the three months ended June 30, 2012 and 2011, respectively, resulting from purchase accounting adjustments associated with Duke Energy’s merger with Cinergy in April 2006. | ||||||||||||||||
(b) | Excludes regulatory asset amortization of $2 million for each of the three months ended June 30, 2012 and 2011, resulting from purchase accounting adjustments associated with Duke Energy’s merger with Cinergy in April 2006. |
|
| Six Months Ended |
| Six Months Ended | |||||||||||||
|
| June 30, 2012 |
| June 30, 2011 | |||||||||||||
(in millions) | Qualified Pension Plans(a) |
| Non-Qualified Pension Plans |
| Other Post-Retirements Benefit Plans(b) |
| Qualified Pension Plans(a) | Non-Qualified Pension Plans |
| Other Post-Retirements Benefit Plans(b) | |||||||
Service cost | $ | 45 |
| $ | 1 |
| $ | 3 |
| $ | 48 | $ | 1 |
| $ | 4 | |
Interest cost on projected benefit obligation |
| 120 |
|
| 3 |
|
| 17 |
|
| 116 |
| 4 |
|
| 18 | |
Expected return on plan assets |
| (188) |
|
| ― |
|
| (8) |
|
| (192) |
| ― |
|
| (8) | |
Amortization of prior service cost (credit) |
| 3 |
|
| 1 |
|
| (4) |
|
| 3 |
| 1 |
|
| (4) | |
Amortization of net transition liability |
| ― |
|
| ― |
|
| 4 |
|
| ― |
| ― |
|
| 5 | |
Amortization of loss (gain) |
| 49 |
|
| 1 |
|
| (3) |
|
| 38 |
| ― |
|
| (2) | |
Other |
| 2 |
|
| ― |
|
| ― |
|
| 9 |
| ― |
|
| ― | |
Net periodic costs | $ | 31 |
| $ | 6 |
| $ | 9 |
| $ | 22 | $ | 6 |
| $ | 13 | |
|
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|
|
(a) | Excludes regulatory asset amortization of $7 million for each of the six months ended June 30, 2012 and 2011, resulting from purchase accounting adjustments associated with Duke Energy’s merger with Cinergy in April 2006. | ||||||||||||||||
(b) | Excludes regulatory asset amortization of $4 million for each of the six months ended June 30, 2012 and 2011, resulting from purchase accounting adjustments associated with Duke Energy’s merger with Cinergy in April 2006. |
Duke Energy Carolinas |
|
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| |
|
| Three Months Ended | �� | Three Months Ended | ||||||||||||||
|
| June 30, 2012 |
| June 30, 2011 | ||||||||||||||
(in millions) |
| Qualified Pension Plans |
|
| Non-Qualified Pension Plans |
|
| Other Post-Retirement Benefit Plans |
|
| Qualified Pension Plans |
|
| Non-Qualified Pension Plans |
|
| Other Post-Retirement Benefit Plans | |
Service cost | $ | 8 |
| $ | ― |
| $ | ― |
| $ | 10 |
| $ | ― |
| $ | 1 | |
Interest cost on projected benefit obligation |
| 22 |
|
| 1 |
|
| 4 |
|
| 22 |
|
| 1 |
|
| 4 | |
Expected return on plan assets |
| (37) |
|
| ― |
|
| (2) |
|
| (38) |
|
| ― |
|
| (3) | |
Amortization of prior service cost (credit) |
| 1 |
|
| ― |
|
| (1) |
|
| ― |
|
| ― |
|
| (2) | |
Amortization of net transition liability |
| ― |
|
| ― |
|
| 2 |
|
| ― |
|
| ― |
|
| 3 | |
Amortization of loss |
| 12 |
|
| ― |
|
| ― |
|
| 9 |
|
| ― |
|
| ― | |
Other |
| 1 |
|
| ― |
|
| ― |
|
| 2 |
|
| ― |
|
| ― | |
Net periodic costs | $ | 7 |
| $ | 1 |
| $ | 3 |
| $ | 5 |
| $ | 1 |
| $ | 3 | |
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67
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
|
| Six Months Ended |
| Six Months Ended | ||||||||||||||
|
| June 30, 2012 |
| June 30, 2011 | ||||||||||||||
(in millions) |
| Qualified Pension Plans |
|
| Non-Qualified Pension Plans |
|
| Other Post-Retirement Benefit Plans |
|
| Qualified Pension Plans |
|
| Non-Qualified Pension Plans |
|
| Other Post-Retirement Benefit Plans | |
Service cost | $ | 17 |
| $ | ― |
| $ | 1 |
| $ | 19 |
| $ | ― |
| $ | 1 | |
Interest cost on projected benefit obligation |
| 45 |
|
| 1 |
|
| 8 |
|
| 43 |
|
| 1 |
|
| 8 | |
Expected return on plan assets |
| (73) |
|
| ― |
|
| (5) |
|
| (75) |
|
| ― |
|
| (5) | |
Amortization of prior service cost (credit) |
| 1 |
|
| ― |
|
| (2) |
|
| ― |
|
| ― |
|
| (3) | |
Amortization of net transition liability |
| ― |
|
| ― |
|
| 3 |
|
| ― |
|
| ― |
|
| 5 | |
Amortization of loss |
| 23 |
|
| ― |
|
| 1 |
|
| 18 |
|
| ― |
|
| 1 | |
Other |
| 1 |
|
| ― |
|
| ― |
|
| 4 |
|
| ― |
|
| ― | |
Net periodic costs | $ | 14 |
| $ | 1 |
| $ | 6 |
| $ | 9 |
| $ | 1 |
| $ | 7 | |
|
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following tables include the components of net periodic pension costs for qualified pension plans. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||
Service cost | $ | 42 |
| $ | 13 |
| $ | 15 |
| $ | 6 |
| $ | 7 |
| $ | 1 |
| $ | 3 | |||||||||||||||||||||||||||
Interest cost on projected benefit obligation |
| 80 |
|
| 20 |
|
| 29 |
|
| 12 |
|
| 14 |
|
| 6 |
|
| 7 | |||||||||||||||||||||||||||
Expected return on plan assets |
| (137) |
|
| (37) |
|
| (49) |
|
| (24) |
|
| (22) |
|
| (7) |
|
| (11) | |||||||||||||||||||||||||||
Amortization of prior service credit |
| (3) |
|
| (1) |
|
| (1) |
|
| ― |
|
| (1) |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of actuarial loss |
| 61 |
|
| 15 |
|
| 25 |
|
| 12 |
|
| 13 |
|
| 3 |
|
| 5 | |||||||||||||||||||||||||||
Other |
| 1 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Net periodic pension costs(a)(b) | $ | 44 |
| $ | 10 |
| $ | 19 |
| $ | 6 |
| $ | 11 |
| $ | 3 |
| $ | 4 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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| ||||||||||||||||||||||||||
|
| Three Months Ended June 30, 2012 | |||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||
Service cost | $ | 22 |
| $ | 8 |
| $ | 16 |
| $ | 7 |
| $ | 7 |
| $ | 1 |
| $ | 3 | |||||||||||||||||||||||||||
Interest cost on projected benefit obligation |
| 59 |
|
| 22 |
|
| 32 |
|
| 14 |
|
| 15 |
|
| 8 |
|
| 7 | |||||||||||||||||||||||||||
Expected return on plan assets |
| (94) |
|
| (37) |
|
| (47) |
|
| (23) |
|
| (20) |
|
| (11) |
|
| (11) | |||||||||||||||||||||||||||
Amortization of prior service cost |
| 2 |
|
| 1 |
|
| 2 |
|
| 2 |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of actuarial loss |
| 25 |
|
| 12 |
|
| 24 |
|
| 10 |
|
| 12 |
|
| 3 |
|
| 4 | |||||||||||||||||||||||||||
Other |
| 1 |
|
| 1 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Net periodic pension costs(a)(b) | $ | 15 |
| $ | 7 |
| $ | 27 |
| $ | 10 |
| $ | 14 |
| $ | 1 |
| $ | 3 | |||||||||||||||||||||||||||
|
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|
|
| ||||||||||||||||||||||||||
(a) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Duke Energy Ohio amounts exclude $1 million for each of the three months ended June 30, 2013 and 2012, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||
Service cost | $ | 84 |
| $ | 25 |
| $ | 30 |
| $ | 11 |
| $ | 15 |
| $ | 3 |
| $ | 6 | |||||||||||||||||||||||||||
Interest cost on projected benefit obligation |
| 160 |
|
| 40 |
|
| 58 |
|
| 25 |
|
| 27 |
|
| 11 |
|
| 14 | |||||||||||||||||||||||||||
Expected return on plan assets |
| (274) |
|
| (74) |
|
| (99) |
|
| (47) |
|
| (44) |
|
| (15) |
|
| (22) | |||||||||||||||||||||||||||
Amortization of prior service credit |
| (6) |
|
| (3) |
|
| (2) |
|
| ― |
|
| (1) |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of actuarial loss |
| 122 |
|
| 30 |
|
| 50 |
|
| 23 |
|
| 25 |
|
| 6 |
|
| 11 | |||||||||||||||||||||||||||
Other |
| 3 |
|
| 1 |
|
| 1 |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Net periodic pension costs(a)(b) | $ | 89 |
| $ | 19 |
| $ | 38 |
| $ | 12 |
| $ | 22 |
| $ | 5 |
| $ | 9 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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| ||||||||||||||||||||||||||
|
| Six Months Ended June 30, 2012 | |||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||
Service cost | $ | 45 |
| $ | 17 |
| $ | 31 |
| $ | 13 |
| $ | 14 |
| $ | 3 |
| $ | 5 | |||||||||||||||||||||||||||
Interest cost on projected benefit obligation |
| 120 |
|
| 45 |
|
| 63 |
|
| 28 |
|
| 28 |
|
| 16 |
|
| 15 | |||||||||||||||||||||||||||
Expected return on plan assets |
| (188) |
|
| (73) |
|
| (93) |
|
| (47) |
|
| (40) |
|
| (22) |
|
| (23) | |||||||||||||||||||||||||||
Amortization of prior service cost |
| 3 |
|
| 1 |
|
| 4 |
|
| 4 |
|
| ― |
|
| ― |
|
| 1 | |||||||||||||||||||||||||||
Amortization of actuarial loss |
| 49 |
|
| 23 |
|
| 46 |
|
| 19 |
|
| 23 |
|
| 5 |
|
| 7 | |||||||||||||||||||||||||||
Other |
| 2 |
|
| 1 |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Net periodic pension costs(a)(b) | $ | 31 |
| $ | 14 |
| $ | 51 |
| $ | 17 |
| $ | 25 |
| $ | 2 |
| $ | 5 | |||||||||||||||||||||||||||
|
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| ||||||||||||||||||||||||||
6897
PART I
DUKE ENERGY CORPORATION -– DUKE ENERGY CAROLINAS, LLC -– PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. -
– DUKE ENERGY INDIANA, INC.
Combined Notes To Unauditedto Condensed Consolidated Financial Statements -– (Continued)
(Unaudited)
|
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(a) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Duke Energy Ohio amounts exclude $3 million for each of the six months ended June 30, 2013, and 2012, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NON-QUALIFIED PENSION PLANS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following tables include the components of net periodic pension costs for non-qualified pension plans for registrants with non-qualified pension costs. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida | ||||||||||||||||||||||||
Service cost | $ | 1 |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― | |||||||||||||||||||
Interest cost on projected benefit obligation |
| 3 |
|
| 1 |
|
| 2 |
|
| 1 |
|
| 1 | |||||||||||||||||||
Amortization of actuarial loss |
| 1 |
|
| ― |
|
| 1 |
|
| ― |
|
| ― | |||||||||||||||||||
Net periodic pension costs | $ | 5 |
| $ | 1 |
| $ | 3 |
| $ | 1 |
| $ | 1 | |||||||||||||||||||
|
|
|
|
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| ||||||||||||||||||
|
| Three Months Ended June 30, 2012 | |||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida | ||||||||||||||||||||||||
Interest cost on projected benefit obligation | $ | 1 |
| $ | 1 |
| $ | 2 |
| $ | 1 |
| $ | 1 | |||||||||||||||||||
Amortization of actuarial loss |
| 1 |
|
| ― |
|
| 1 |
|
| ― |
|
| ― | |||||||||||||||||||
Amortization of prior service cost |
| 1 |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||
Net periodic pension costs | $ | 3 |
| $ | 1 |
| $ | 3 |
| $ | 1 |
| $ | 1 | |||||||||||||||||||
|
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| ||||||||||||||||||
|
| Six Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida | ||||||||||||||||||||||||
Service cost | $ | 1 |
| $ | ― |
| $ | ― |
| $ | ― |
| $ | ― | |||||||||||||||||||
Interest cost on projected benefit obligation |
| 7 |
|
| 1 |
|
| 4 |
|
| 1 |
|
| 1 | |||||||||||||||||||
Amortization of actuarial loss |
| 3 |
|
| ― |
|
| 2 |
|
| ― |
|
| ― | |||||||||||||||||||
Amortization of prior service credit |
| (1) |
|
| ― |
|
| (1) |
|
| ― |
|
| ― | |||||||||||||||||||
Net periodic pension costs | $ | 10 |
| $ | 1 |
| $ | 5 |
| $ | 1 |
| $ | 1 | |||||||||||||||||||
|
|
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|
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| ||||||||||||||||||
|
| Six Months Ended June 30, 2012 | |||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida | ||||||||||||||||||||||||
Service cost | $ | 1 |
| $ | ― |
| $ | 1 |
| $ | ― |
| $ | ― | |||||||||||||||||||
Interest cost on projected benefit obligation |
| 3 |
|
| 1 |
|
| 4 |
|
| 1 |
|
| 1 | |||||||||||||||||||
Amortization of actuarial loss |
| 1 |
|
| ― |
|
| 2 |
|
| ― |
|
| ― | |||||||||||||||||||
Amortization of prior service cost |
| 1 |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||
Net periodic pension costs | $ | 6 |
| $ | 1 |
| $ | 7 |
| $ | 1 |
| $ | 1 | |||||||||||||||||||
|
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| ||||||||||||||||||
98
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy and most of its subsidiaries provide, and the Subsidiary Registrants participate in, some health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans. The health care benefits include medical coverage, dental coverage, and prescription drug coverage and are subject to certain limitations, such as deductibles and co-payments.
The following tables include the components of net periodic other post-retirement benefit costs.
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| ||||||||||||||||||||||||||
|
| Three Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||
Service cost | $ | 7 |
| $ | ― |
| $ | 5 |
| $ | 3 |
| $ | 2 |
| $ | ― |
| $ | ― | |||||||||||||||||||||||||||
Interest cost on accumulated post-retirement benefit obligation |
| 18 |
|
| 3 |
|
| 12 |
|
| 6 |
|
| 4 |
|
| 1 |
|
| 2 | |||||||||||||||||||||||||||
Expected return on plan assets |
| (4) |
|
| (2) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of prior service credit |
| (3) |
|
| (2) |
|
| (1) |
|
| (1) |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of actuarial loss (gain) |
| 13 |
|
| 1 |
|
| 15 |
|
| 9 |
|
| 4 |
|
| (1) |
|
| ― | |||||||||||||||||||||||||||
Net periodic costs(a) | $ | 31 |
| $ | ― |
| $ | 31 |
| $ | 17 |
| $ | 10 |
| $ | ― |
| $ | 2 | |||||||||||||||||||||||||||
|
|
|
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| ||||||||||||||||||||||||||
|
| Three Months Ended June 30, 2012 | |||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||
Service cost | $ | 1 |
| $ | ― |
| $ | 4 |
| $ | 2 |
| $ | 1 |
| $ | ― |
| $ | ― | |||||||||||||||||||||||||||
Interest cost on accumulated post-retirement benefit obligation |
| 9 |
|
| 4 |
|
| 11 |
|
| 6 |
|
| 4 |
|
| ― |
|
| 2 | |||||||||||||||||||||||||||
Expected return on plan assets |
| (4) |
|
| (2) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| (1) | |||||||||||||||||||||||||||
Amortization of prior service (credit) cost |
| (2) |
|
| (1) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 1 | |||||||||||||||||||||||||||
Amortization of net transition liability |
| 2 |
|
| 2 |
|
| 1 |
|
| ― |
|
| 1 |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of actuarial (gain) loss |
| (1) |
|
| ― |
|
| 9 |
|
| 6 |
|
| 3 |
|
| ― |
|
| (1) | |||||||||||||||||||||||||||
Net periodic costs(a) | $ | 5 |
| $ | 3 |
| $ | 25 |
| $ | 14 |
| $ | 9 |
| $ | ― |
| $ | 1 | |||||||||||||||||||||||||||
|
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| ||||||||||||||||||||||||||
(a) | Duke Energy amounts exclude $2 million for each of the three months ended June 30, 2013 and 2012, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy’s merger with Cinergy. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||
Service cost | $ | 14 |
| $ | 1 |
| $ | 11 |
| $ | 6 |
| $ | 4 |
| $ | ― |
| $ | ― | |||||||||||||||||||||||||||
Interest cost on accumulated post-retirement benefit obligation |
| 36 |
|
| 6 |
|
| 23 |
|
| 12 |
|
| 8 |
|
| 1 |
|
| 3 | |||||||||||||||||||||||||||
Expected return on plan assets |
| (7) |
|
| (5) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of prior service credit |
| (6) |
|
| (4) |
|
| (1) |
|
| (1) |
|
| ― |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of actuarial loss (gain) |
| 26 |
|
| 2 |
|
| 29 |
|
| 18 |
|
| 8 |
|
| (1) |
|
| ― | |||||||||||||||||||||||||||
Net periodic pension costs(a)(b) | $ | 63 |
| $ | ― |
| $ | 62 |
| $ | 35 |
| $ | 20 |
| $ | ― |
| $ | 3 | |||||||||||||||||||||||||||
|
|
|
|
|
|
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|
|
|
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|
|
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|
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|
|
|
|
| ||||||||||||||||||||||||||
|
| Six Months Ended June 30, 2012 | |||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||||||||
Service cost | $ | 3 |
| $ | 1 |
| $ | 7 |
| $ | 4 |
| $ | 3 |
| $ | ― |
| $ | ― | |||||||||||||||||||||||||||
Interest cost on accumulated post-retirement benefit obligation |
| 17 |
|
| 8 |
|
| 21 |
|
| 11 |
|
| 9 |
|
| 1 |
|
| 4 | |||||||||||||||||||||||||||
Expected return on plan assets |
| (8) |
|
| (5) |
|
| (1) | �� |
| ― |
|
| (1) |
|
| ― |
|
| (1) | |||||||||||||||||||||||||||
Amortization of prior service (credit) cost |
| (4) |
|
| (2) |
|
| ― |
|
| ― |
|
| ― |
|
| ― |
|
| 1 | |||||||||||||||||||||||||||
Amortization of net transition liability |
| 4 |
|
| 3 |
|
| 2 |
|
| ― |
|
| 2 |
|
| ― |
|
| ― | |||||||||||||||||||||||||||
Amortization of actuarial (gain) loss |
| (3) |
|
| 1 |
|
| 15 |
|
| 8 |
|
| 5 |
|
| (1) |
|
| (1) | |||||||||||||||||||||||||||
Net periodic pension costs(a)(b) | $ | 9 |
| $ | 6 |
| $ | 44 |
| $ | 23 |
| $ | 18 |
| $ | ― |
| $ | 3 | |||||||||||||||||||||||||||
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99
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
(a) | Duke Energy amounts exclude $4 million for each of the six months ended June 30, 2013 and 2012, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy’s merger with Cinergy. | ||||||||||||||||||||||||||||||||||||||||
(b) |
| ||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||
Duke Energy Indiana |
|
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|
|
| |
|
| Three Months Ended |
| Three Months Ended | ||||||||
|
| June 30, 2012 |
| June 30, 2011 | ||||||||
(in millions) |
| Qualified Pension Plans |
|
| Other Post-Retirement Benefit Plans |
|
| Qualified Pension Plans |
|
| Other Post-Retirement Benefit Plans | |
Service cost | $ | 3 |
| $ | ― |
| $ | 2 |
| $ | ― | |
Interest cost on projected benefit obligation |
| 7 |
|
| 2 |
|
| 8 |
|
| 2 | |
Expected return on plan assets |
| (11) |
|
| (1) |
|
| (11) |
|
| (1) | |
Amortization of prior service cost |
| ― |
|
| 1 |
|
| 1 |
|
| ― | |
Amortization of loss (gain) |
| 4 |
|
| (1) |
|
| 3 |
|
| 1 | |
Other |
|
| ― |
|
| ― |
|
| 1 |
|
| ― |
Net periodic costs(a) | $ | 3 |
| $ | 1 |
| $ | 4 |
| $ | 2 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Components of net periodic costs for Duke Energy Indiana's non-qualified pension plans were an insignificant amount for each of the three months ended June 30, 2012 and 2011. |
|
| Six Months Ended |
| Six Months Ended | ||||||||
|
| June 30, 2012 |
| June 30, 2011 | ||||||||
(in millions) |
| Qualified Pension Plans |
|
| Other Post-Retirement Benefit Plans |
|
| Qualified Pension Plans |
|
| Other Post-Retirement Benefit Plans | |
Service cost | $ | 5 |
| $ | ― |
| $ | 5 |
| $ | ― | |
Interest cost on projected benefit obligation |
| 15 |
|
| 4 |
|
| 15 |
|
| 4 | |
Expected return on plan assets |
| (23) |
|
| (1) |
|
| (22) |
|
| (1) | |
Amortization of prior service cost |
| 1 |
|
| 1 |
|
| 1 |
|
| ― | |
Amortization of loss (gain) |
| 7 |
|
| (1) |
|
| 7 |
|
| 1 | |
Other |
| ― |
|
| ― |
|
| 1 |
|
| ― | |
Net periodic costs(a) | $ | 5 |
| $ | 3 |
| $ | 7 |
| $ | 4 | |
|
|
|
|
|
|
|
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|
|
|
|
|
(a) | Components of net periodic costs for Duke Energy Indiana's non-qualified pension plans were an insignificant amount for each of the six months ended June 30, 2012 and 2011. |
Employee Savings PlanEMPLOYEE SAVINGS PLANS
Duke Energy sponsorsand Progress Energy sponsor, and the Subsidiary Registrants participate in, employee savings plans that cover substantially all U.S. employees. Most employees participate in a matching contribution formula where Duke Energy made pre-tax employerprovides a matching contribution generally equal to 100 percent of employee before-tax and Roth 401(k) contributions, and, as applicable, after-tax contributions, of $19 million for eachup to 6 percent of the three months ended June 30, 2012 and 2011, respectively.eligible pay per pay period. Dividends on Duke Energy made pre-taxshares held by the savings plans are charged to retained earnings when declared and shares held in the plans are considered outstanding in the calculation of basic and diluted EPS.
Pretax employer matching contributions of $47 million and $50 million forexpensed by the six months ended June 30, 2012 and 2011, respectively.
The Subsidiary Registrants participate in Duke Energy sponsored employee savings plans. The following table shows the respective Subsidiary Registrants’ expense related to its proportionate share of pre-tax employer contributions.
were as follows.
69
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
| June 30, |
| June 30, | ||||||||
(in millions) |
| 2012 |
|
| 2011 |
|
| 2012 |
|
| 2011 | |
Duke Energy Carolinas | $ | 9 |
| $ | 8 |
| $ | 20 |
| $ | 20 | |
Duke Energy Ohio |
| 1 |
|
| 1 |
|
| 2 |
|
| 2 | |
Duke Energy Indiana |
| 1 |
|
| 2 |
|
| 3 |
|
| 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | |||||||||||||||||||||
For the three months ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
2013 | $ | 30 |
| $ | 10 |
| $ | 10 |
| $ | 6 |
| $ | 3 |
| $ | 1 |
| $ | 1 | ||||||||||||||
2012 |
| 19 |
|
| 9 |
|
| 10 |
|
| 6 |
|
| 3 |
|
| 1 |
|
| 1 | ||||||||||||||
|
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(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana | |||||||||||||||||||||
For the six months ended June 30, |
|
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|
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|
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|
|
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|
|
| ||||||||||||||||
2013 | $ | 71 |
| $ | 24 |
| $ | 22 |
| $ | 12 |
| $ | 7 |
| $ | 2 |
| $ | 3 | ||||||||||||||
2012 |
| 47 |
|
| 20 |
|
| 22 |
|
| 12 |
|
| 7 |
|
| 2 |
|
| 3 | ||||||||||||||
|
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15. SeveranceSEVERANCE
2011 Severance Plan.In conjunction with the merger with Progress Energy, in November 2011 Duke Energy and Progress Energy offered a voluntary severance plan to certain eligible employees. As this was a voluntary severance plan, all severance benefits offered under this plan are considered special termination benefits under U.S. GAAP. Special termination benefits are measured upon employee acceptance and recorded immediately absent any significant retention period. If a significant retention period exists, the cost of the special termination benefits are recorded ratably over the retention period. Approximately 1,100 employees from Duke Energy and Progress Energy accepted the termination benefitsrequested severance during the voluntary window, period, which closed on November 30, 2011. The estimated amount of future severance paymentsexpense associated with this voluntary plan and other severance benefits arethrough 2014, excluding amounts incurred through June 30, 2013, is expected to range from $225be approximately $10 million to $275 million. A significant majority of the severance benefits will be recognized as expense in the second half of 2012 and most of the costs will be charged to Duke Energy Carolinas, Duke Energy Progress Energy Carolinas and ProgressDuke Energy Florida.
Other Severance Plans.Additionally, in the third quarter of 2012, a voluntary severance plan was offered to certain unionized employees of Duke Energy Ohio. Approximately 75 employees accepted the termination benefits during the voluntary window, which closed on October 8, 2012. The expense associated with this plan was not material.
In conjunction with the retirement of Crystal River Unit 3, severance benefits will be made available to certain eligible impacted unionized and non-unionized employees, to the extent that those employees do not find job opportunities at other locations. Approximately 600 employees worked at Crystal River Unit 3. For the six months ended June 30, 2013, Duke Energy Florida deferred $28 million of severance costs as a regulatory asset. An additional $5 million of severance costs is expected to be accrued over the remaining retention period for employees identified to have a significant retention period. However, these employees maintain the ability to accept job opportunities at other Duke Energy locations, which would result in severance not being paid. If a significant amount of these individuals redeploy within Duke Energy, the final severance benefits paid under the plan may be less than what has been accrued to date. Refer to Note 4 for further discussion regarding Crystal River Unit 3.
Amounts included in the table below represent direct and allocated severance and related expense recorded by the Duke Energy Registrants, and are recorded in Operation, maintenance, and other within Operating Expenses on the Condensed Consolidated Statements of Operations. The Duke Energy Registrants recorded no severance liability for Duke Energy’s past and on-going severance plans.expense during the three or six months ended June 30, 2012.
|
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|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy(a) |
| $ | 9 |
| $ | 25 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy Carolinas |
|
| 2 |
|
| 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Progress Energy |
|
| 6 |
|
| 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy Progress |
|
| 4 |
|
| 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy Florida |
|
| 2 |
|
| 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy Ohio |
|
| 1 |
|
| 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Duke Energy Indiana |
|
| 1 |
|
| 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
(a) | Includes $5 million of accelerated stock award expense for the six months ended June 30, 2013. There was an insignificant amount of accelerated stock award expense for the three months ended June 30, 2013. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Amounts included in the table below represent the severance liability for past and ongoing severance plans. Amounts for Subsidiary Registrants do not include allocated expense or associated cash payments. Amounts for Duke Energy Ohio and Duke Energy Indiana are not material. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(in millions) | Duke Energy |
| Duke Energy Carolinas |
| Progress Energy |
| Duke Energy Progress |
| Duke Energy Florida | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2012 | $ | 135 |
| $ | 12 |
| $ | 43 |
| $ | 23 |
| $ | 6 | |||||||||||||||||||||||||||||||||||||||||||
Provision / Adjustments(a) |
| 35 |
|
| 2 |
|
| 40 |
|
| 4 |
|
| 30 | |||||||||||||||||||||||||||||||||||||||||||
Cash Reductions |
| (90) |
|
| (11) |
|
| (31) |
|
| (15) |
|
| (7) | |||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2013 | $ | 80 |
| $ | 3 |
| $ | 52 |
| $ | 12 |
| $ | 29 | |||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||
(a) | Provision / Adjustments for Duke Energy, Progress Energy and Duke Energy Florida includes $28 million of severance costs deferred related to Crystal River Unit 3. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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100
|
|
| Balance at |
| Provision / |
| Cash |
| Balance at | ||||
(in millions) |
| December 31, 2011 |
| Adjustments |
| Reductions |
| June 30, 2012 | |||||
Duke Energy |
| $ | 32 |
| $ | (1) |
| $ | (8) |
| $ | 23 | |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
As part of Duke Energy Carolinas’ 2011 rate case, the NCUC approved the recovery of $101 million of previously recorded expenses related to a prior year Voluntary Opportunity Plan which were recorded in 2012.
16. Income Taxes and Other TaxesINCOME TAXES AND OTHER TAXES
Income Taxes. INCOME TAXES
Duke Energy and its subsidiaries file income tax returns in the U.S. with federal and various state governmental authorities, and in certain foreign jurisdictions. The taxable income of Duke Energy and its subsidiaries is reflected in Duke Energy’s U.S. federal and state income tax returns. These subsidiaries have a tax sharing agreement with Duke Energy where the separate return method is used to allocate tax expenses and benefits to the subsidiaries whose investments or results of operations provide these tax expenses and benefits. The accounting for income taxes essentially represents the income taxes that each of these subsidiaries would incur if it were a separate company filing its own tax return as a C-Corporation.
The effective tax rates for each of the Duke Energy Registrants are as follows:included in the following table.
|
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| |||||||||||
|
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
|
| 2013 |
|
| 2012 |
|
| 2013 |
|
| 2012 |
| ||||||||||||
Duke Energy |
| 32.5 | % |
| 32.2 | % |
| 33.6 | % |
| 29.8 | % | ||||||||||||
Duke Energy Carolinas |
| 37.4 | % |
| 37.2 | % |
| 37.2 | % |
| 36.7 | % | ||||||||||||
Progress Energy |
| 59.9 | % |
| 38.2 | % |
| 36.7 | % |
| 36.1 | % | ||||||||||||
Duke Energy Progress |
| 39.6 | % |
| 30.3 | % |
| 38.7 | % |
| 31.4 | % | ||||||||||||
Duke Energy Florida |
| 38.0 | % |
| 38.8 | % |
| 39.8 | % |
| 37.5 | % | ||||||||||||
Duke Energy Ohio |
| 36.3 | % |
| 39.9 | % |
| 35.9 | % |
| 38.1 | % | ||||||||||||
Duke Energy Indiana |
| 37.5 | % |
| 34.4 | % |
| 37.5 | % |
| 45.7 | % | ||||||||||||
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| |||||||||||
102
|
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
|
| June 30, |
| June 30, | ||||||||
|
|
| 2012 |
| 2011 |
| 2012 |
| 2011 | ||||
Duke Energy |
| 32.2 | % |
| 30.4 | % |
| 29.8 | % |
| 30.8 | % | |
Duke Energy Carolinas |
| 37.2 | % |
| 35.5 | % |
| 36.7 | % |
| 35.3 | % | |
Duke Energy Ohio |
| 39.9 | % |
| 9.6 | % |
| 38.1 | % |
| 30.4 | % | |
Duke Energy Indiana |
| 34.4 | % |
| 29.3 | % |
| 45.7 | % |
| 32.3 | % |
PART I
ForDUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The increase in the effective tax rate for Duke Energy for the six months ended June 30, 2013, is primarily due to lower pretax income in 2012 due to the Edwardsport IGCC project impairment, Progress Energy results of operations included in 2013, impact of lower AFUDC equity in 2013, and a reduction of foreign deferred taxes in 2012 due to changes in foreign tax rates.
The increase in the effective tax rate for Progress Energy for the three months ended June 30, 2012,2013, is primarily due to the pretax loss in 2013 related to the 2013 FPSC settlement agreement, the impact of lower AFUDC equity and the Employee Stock Ownership Plan (ESOP) dividend deduction being recorded at Duke Energy’sEnergy in 2013.
The increase in the effective tax rate increased primarily due to a $10 million reduction of deferred tax liabilities as a result of an election related to the transfer of certain gas fired generation assets to its wholly owned subsidiaryfor Duke Energy Commercial Asset Management, LLC (DECAM) in the second quarter of 2011. For the six months ended June 30, 2012, Duke Energy reflected a decrease in its effective tax rate primarily due to a decrease in pretax income related to the Edwardsport IGCC project impairment charges.
In addition,Progress for the three and six months ended June 30, 2012,2013, is primarily due to the favorable prior-year tax benefit related to the manufacturing deduction and the impact of lower AFUDC equity in 2013.
The increase in the effective tax rate for Duke Energy Carolinas reflected an increaseFlorida for the six months ended June 30, 2013, was primarily due to charges related to the 2013 FPSC settlement agreement, the favorable prior-year tax benefit related to the manufacturing deduction and the impact of lower AFUDC equity in its2013.
The decrease in the effective tax rate for Duke Energy Ohio for the three months ended June 30, 2013, is primarily due to a decreaseone time true up of accumulated deferred income taxes in AFUDC equity, Duke Energy Ohio’s2012.
The increase in the effective tax rate increasedfor Duke Energy Indiana for the three months ended June 30, 2013, is primarily due to an increasethe impact of lower AFUDC equity in pretax income and a $10 million reduction of deferred tax liabilities as a result of an election related to the transfer of certain gas-fired generation assets to its wholly owned subsidiary DECAM2013. The decrease in the second quarter of 2011, andeffective tax rate for Duke Energy Indiana reflected an increase in its effective tax ratefor the six months ended June 30, 2013, is primarily due to an increasepretax income in 2013 compared to pretax loss in 2012 related to the Edwardsport IGCC project impairment charges. See Note 4 forand the impact of AFUDC equity in 2013 that reduced the tax expense compared to higher AFUDC equity in 2012, which increased the tax benefit.
On July 23, 2013, North Carolina House Bill 998 (HB 998) was signed into law. HB 998 reduces the North Carolina corporate income tax rate from a statutory 6.9 percent to 6.0 percent in January 2014 with a further detailsreduction to 5.0 percent in January 2015. Duke Energy anticipates a net reduction of approximately $150 million to its North Carolina deferred tax liability based on a preliminary analysis. The significant majority of this deferred tax liability relates to Duke Energy Carolinas and Duke Energy Progress. Therefore, it is expected that the impairment charges.offsetting impact will be recorded as a regulatory liability reflecting a future benefit to Duke Energy Carolinas’ and Duke Energy Progress’ customers. The impact of HB 998 is not expected to have a significant impact to the financial position, results of operation, or cash flows of Duke Energy, Duke Energy Carolinas, Progress Energy or Duke Energy Progress.
Excise Taxes.EXCISE TAXES
Certain excise taxes levied by state or local governments are collected by the Duke Energy Registrants from itstheir customers. These taxes, which are required to be paid regardless of the Duke Energy Registrants’ ability to collect from the customer, are accounted for on a gross basis. When each of the Duke Energy Registrants act as an agent, and the tax is not required to be remitted if it is not collected from the customer, the taxes are accounted for on a net basis. Excise taxes for eachThe Duke Energy Registrant areRegistrants’ excise taxes accounted for on a gross basis and recorded as operating revenues and other tax expense in the respective Condensed Consolidated Statements of Operations were as follows:
are included in the following table.
70
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
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| Three Months Ended |
| Six Months Ended |
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| June 30, |
| June 30, |
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| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||||||||||||||||||
(in millions) | (in millions) |
| 2012 |
| 2011 |
| 2012 |
| 2011 | (in millions) |
|
| 2013 |
|
| 2012 |
|
|
| 2013 |
|
| 2012 | |||||||||||||||
Duke Energy | Duke Energy |
| $ | 142 |
| $ | 70 |
|
| $ | 291 |
| $ | 147 | ||||||||||||||||||||||||
Duke Energy Carolinas | Duke Energy Carolinas |
| $ | 39 |
| $ | 37 |
| $ | 78 |
| $ | 73 | Duke Energy Carolinas |
|
| 37 |
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| 39 |
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|
| 78 |
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| 78 | |||||||||||
Progress Energy | Progress Energy |
|
| 73 |
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| 77 |
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| 141 |
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| 146 | ||||||||||||||||||||||||
Duke Energy Progress | Duke Energy Progress |
|
| 27 |
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| 26 |
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| 55 |
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| 52 | ||||||||||||||||||||||||
Duke Energy Florida | Duke Energy Florida |
|
| 46 |
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| 51 |
|
|
| 86 |
|
| 94 | ||||||||||||||||||||||||
Duke Energy Ohio | Duke Energy Ohio |
|
| 23 |
| 25 |
|
| 53 |
| 59 | Duke Energy Ohio |
|
| 24 |
|
| 23 |
|
|
| 55 |
|
| 53 | |||||||||||||
Duke Energy Indiana | Duke Energy Indiana |
|
| 8 |
| 7 |
|
| 16 |
| 15 | Duke Energy Indiana |
|
| 8 |
|
| 8 |
|
|
| 17 |
|
| 16 | |||||||||||||
Duke Energy |
| $ | 70 |
| $ | 69 |
| $ | 147 |
| $ | 147 | ||||||||||||||||||||||||||
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17. Related Party TransactionsRELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions, which are generally performed at cost and in accordance with the applicable state and federal commission regulations. BalancesRefer to the Condensed Consolidated Balance Sheets of Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana for balances due to or due from related parties included in the Condensed Consolidated Balance Sheets and amountsparties. Amounts related to transactions with related parties included in the Condensed Consolidated Statements of Operations and Comprehensive Income and presented in the following tables.
were as follows.
Duke Energy Carolinas |
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| Balances due to and due from related parties included on the Condensed Consolidated Balance Sheets, which exclude | ||||||||
assets or liabilities associated with accrued pension and other post-retirement benefits and money pool arrangements, are | |||||||||
presented in the following table: | |||||||||
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(in millions) |
|
| June 30, 2012 |
|
| December 31, 2011 | |||
Current assets |
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| |
| Receivables |
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| $ | ― |
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| $ | 2 |
| Other |
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| $ | 95 |
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| $ | 95 |
Non-current assets |
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| |
| Other |
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| $ | 111 |
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| $ | 111 |
Current liabilities |
|
|
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|
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| |
| Accounts payable |
|
| $ | (97) |
|
| $ | (157) |
| Taxes Accrued |
|
| $ | (10) |
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| $ | (14) |
Non-current liabilities |
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| |
| Deferred income taxes |
|
| $ | (4,891) |
|
| $ | (4,555) |
| Other |
|
| $ | (64) |
|
| $ | (64) |
| As discussed further in Note 14, Duke Energy Carolinas participates in Duke Energy's qualified pension, non-qualified pension | ||||||||
and other post-retirement benefit plans and is allocated its proportionate share of expenses associated with these plans. Additionally, Duke Energy Carolinas has been allocated accrued pension and other post-retirement benefit obligations as shown in the following table: | |||||||||
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(in millions) |
|
| June 30, 2012 |
|
| December 31, 2011 | |||
Other current liabilities |
|
| $ | 8 |
|
| $ | 8 | |
Accrued pension and other post-retirement benefit obligations |
|
|
| 232 |
|
|
| 248 | |
Total allocated accrued pension and other post-retirement benefit obligations |
|
| $ | 240 |
|
| $ | 256 |
| Amounts related to transactions with related parties included in the Condensed Consolidated Statements of Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||
and Comprehensive Income are presented in the following table: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) | June 30, 2012 |
| June 30, 2011 |
| June 30, 2012 |
| June 30, 2011 | (in millions) |
|
| 2013 |
| 2012 |
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| 2013 |
| 2012 | |||||||||||||||||||||||||||||||||
Duke Energy Carolinas | Duke Energy Carolinas |
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Corporate governance and shared service expenses(a) | Corporate governance and shared service expenses(a) | $ | 254 |
| $ | 251 |
| $ | 489 |
| $ | 504 | Corporate governance and shared service expenses(a) |
| $ | 235 |
| $ | 254 |
|
| $ | 478 |
| $ | 489 | |||||||||||||||||||||||||||
Indemnification coverages(b) | Indemnification coverages(b) | $ | 6 |
| $ | 5 |
| $ | 11 |
| $ | 10 | Indemnification coverages(b) |
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| 6 |
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| 6 |
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| 11 |
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| 11 | |||||||||||||||||||||||||||
Rental income and other charged expenses, net(c) | $ | (5) |
| $ | (2) |
| $ | (7) |
| $ | (4) | ||||||||||||||||||||||||||||||||||||||||||
Interest expense on money pool(d) | $ | 1 |
| $ | ― |
| $ | 1 |
| $ | ― | ||||||||||||||||||||||||||||||||||||||||||
Joint Dispatch Agreement (JDA) revenue(c) | Joint Dispatch Agreement (JDA) revenue(c) |
|
| 24 |
|
| ― |
|
|
| 77 |
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| ― | |||||||||||||||||||||||||||||||||||||||
JDA expense(c) | JDA expense(c) |
|
| 22 |
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| ― |
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| 32 |
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| ― | |||||||||||||||||||||||||||||||||||||||
Progress Energy | Progress Energy |
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Corporate governance and shared services provided by Duke Energy(a) | Corporate governance and shared services provided by Duke Energy(a) |
| $ | 111 |
| $ | ― |
|
| $ | 273 |
| $ | ― | |||||||||||||||||||||||||||||||||||||||
Corporate governance and shared services provided to Duke Energy(d) | Corporate governance and shared services provided to Duke Energy(d) |
|
| 22 |
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| ― |
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| 50 |
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| ― | |||||||||||||||||||||||||||||||||||||||
Indemnification coverages(b) | Indemnification coverages(b) |
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| 9 |
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| ― |
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| 17 |
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| ― | |||||||||||||||||||||||||||||||||||||||
JDA revenue(c) | JDA revenue(c) |
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| 22 |
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| ― |
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| 32 |
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| ― | |||||||||||||||||||||||||||||||||||||||
JDA expense(c) | JDA expense(c) |
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| 24 |
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| ― |
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| 77 |
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| ― | |||||||||||||||||||||||||||||||||||||||
Duke Energy Progress | Duke Energy Progress |
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Corporate governance and shared service expenses(a) | Corporate governance and shared service expenses(a) |
| $ | 66 |
| $ | 59 |
|
| $ | 162 |
| $ | 111 | |||||||||||||||||||||||||||||||||||||||
Indemnification coverages(b) | Indemnification coverages(b) |
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| 5 |
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| ― |
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| 10 |
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| ― | |||||||||||||||||||||||||||||||||||||||
JDA revenue(c) | JDA revenue(c) |
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| 22 |
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| ― |
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| 32 |
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| ― | |||||||||||||||||||||||||||||||||||||||
JDA expense(c) | JDA expense(c) |
|
| 24 |
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| ― |
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| 77 |
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| ― | |||||||||||||||||||||||||||||||||||||||
Duke Energy Florida | Duke Energy Florida |
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Corporate governance and shared service expenses(a) | Corporate governance and shared service expenses(a) |
| $ | 45 |
| $ | 45 |
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| $ | 111 |
| $ | 84 | |||||||||||||||||||||||||||||||||||||||
Indemnification coverages(b) | Indemnification coverages(b) |
|
| 4 |
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| ― |
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| 7 |
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| ― | |||||||||||||||||||||||||||||||||||||||
Duke Energy Ohio | Duke Energy Ohio |
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Corporate governance and shared service expenses(a) | Corporate governance and shared service expenses(a) |
| $ | 85 |
| $ | 86 |
|
| $ | 172 |
| $ | 176 | |||||||||||||||||||||||||||||||||||||||
Indemnification coverages(b) | Indemnification coverages(b) |
|
| 4 |
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| 3 |
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| 8 |
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| 7 | |||||||||||||||||||||||||||||||||||||||
Duke Energy Indiana | Duke Energy Indiana |
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Corporate governance and shared service expenses(a) | Corporate governance and shared service expenses(a) |
| $ | 101 |
| $ | 98 |
|
| $ | 200 |
| $ | 199 | |||||||||||||||||||||||||||||||||||||||
Indemnification coverages(b) | Indemnification coverages(b) |
|
| 3 |
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| 2 |
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| 5 |
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| 4 | |||||||||||||||||||||||||||||||||||||||
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(a) | Duke Energy Carolinas is charged its proportionate share of corporate governance and other costs by an unconsolidated affiliate that is a consolidated affiliate of Duke Energy. Corporate governance and other shared services costs are primarily related to human resources, employee benefits, legal and accounting fees, as well as other third party costs. These amounts are recorded in Operation, Maintenance and Other within Operating Expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income. | (a) | The Subsidiary Registrants are charged their proportionate share of corporate governance and other costs by unconsolidated affiliates that are consolidated affiliates of Duke Energy and Progress Energy. Corporate governance and other shared services costs are primarily related to human resources, employee benefits, legal and accounting fees, as well as other third party costs. These amounts are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income. | ||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Duke Energy Carolinas incurs expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, Maintenance and Other within Operating Expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income. | (b) | The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income. | ||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | Duke Energy Carolinas records income associated with the rental of office space to a consolidated affiliate of Duke Energy, as well as its proportionate share of certain charged expenses from affiliates of Duke Energy. | (c) | Effective with the consummation of the merger between Duke Energy and Progress Energy, Duke Energy Carolinas and Duke Energy Progress began to participate in a JDA which allowed the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power under the JDA are recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Expenses from the purchase of power under the JDA are recorded in Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations and Comprehensive Income. | ||||||||||||||||||||||||||||||||||||||||||||||||||
(d) | Recorded in Interest Expense on the Condensed Consolidated Statements of Operations and Comprehensive Income. See Note 6 for additional information related to money pool. | (d) | Progress Energy charges a proportionate share of corporate governance and other costs to unconsolidated affiliates that are consolidated affiliates of Duke Energy. Corporate governance and other shared costs are primarily related to human resources, employee benefits, legal and accounting fees, as well as other third-party costs. These charges are recorded as an offset to Operation, maintenance and other in the Condensed Consolidated Statements of Operations and Comprehensive Income. | ||||||||||||||||||||||||||||||||||||||||||||||||||
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71103
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -In addition to the amounts presented above, the Subsidiary Registrants record income associated with the rental of office space to consolidated affiliates of Duke Energy, as well as their proportionate share of certain charged expenses from affiliates of Duke Energy. The Subsidiary Registrants participate in a money pool arrangement with Duke Energy and certain of its subsidiaries. See Note 6 for more information regarding money pool. As discussed in Note 11, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to CRC, an unconsolidated entity formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but do include a subordinated note from CRC for a portion of the purchase price. Rental income, interest income and interest expense on these transactions were not material for the three or six months ended June 30, 2013 and 2012.
DUKE ENERGY INDIANA, INC.In January 2012, Duke Energy Ohio recorded a non-cash after tax equity transfer of $28 million related to the sale of Vermilion to Duke Energy Indiana. Duke Energy Indiana recorded a non-cash after tax equity transfer of $26 million for the purchase of Vermillion from Duke Energy Ohio. See note 2 for further discussion.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
Duke Energy Ohio |
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| Balances due to and due from related parties included in the Condensed Consolidated Balance Sheets, which exclude | ||||||||
assets or liabilities associated with accrued pension and other post-retirement benefits, CRC and money pool arrangements, are presented in the following table: | |||||||||
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(in millions) |
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| June 30, 2012 |
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| December 31, 2011 | |||
Current assets |
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| |
| Receivables |
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| $ | 7 |
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| $ | 15 |
| Other |
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| $ | 98 |
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| $ | 76 |
Non-current assets |
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| |
| Other |
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| $ | 28 |
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| $ | 22 |
Current liabilities |
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|
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| |
| Accounts payable |
|
| $ | (73) |
|
| $ | (84) |
| Taxes Accrued |
|
| $ | (4) |
|
| $ | ― |
Non-current liabilities |
|
|
|
|
|
|
|
| |
| Deferred income taxes |
|
| $ | (1,882) |
|
| $ | (1,798) |
| Other |
|
| $ | (34) |
|
| $ | ― |
| As discussed further in Note 14, Duke Energy Ohio participates in Duke Energy’s qualified pension, non-qualified | ||||||||
pension and other post-retirement benefit plans and is allocated its proportionate share of expenses associated with these plans. Additionally, Duke Energy Ohio has been allocated accrued pension and other post-retirement benefit obligations as shown in the following table: | |||||||||
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|
|
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|
(in millions) |
|
| June 30, 2012 |
|
| December 31, 2011 | |||
Other current liabilities |
|
| $ | 4 |
|
| $ | 4 | |
Accrued pension and other post-retirement benefit obligations |
|
|
| 160 |
|
|
| 166 | |
Total allocated accrued pension and other post-retirement benefit obligations |
|
| $ | 164 |
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| $ | 170 |
| Amounts related to transactions with related parties included in the Condensed Consolidated Statements of Operations and | |||||||||||
Comprehensive Income are presented in the following table: | ||||||||||||
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| Three Months Ended |
| Six Months Ended | ||||||||
(in millions) | June 30, 2012 |
| June 30, 2011 |
| June 30, 2012 |
| June 30, 2011 | |||||
Corporate governance and shared service expenses(a) | $ | 86 |
| $ | 91 |
| $ | 176 |
| $ | 186 | |
Indemnification coverages(b) | $ | 3 |
| $ | 4 |
| $ | 7 |
| $ | 8 | |
Rental income and other charged expenses, net(c) | $ | ― |
| $ | ― |
| $ | (1) |
| $ | ― | |
CRC interest income(d) | $ | 1 |
| $ | 3 |
| $ | 3 |
| $ | 7 | |
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(a) | Duke Energy Ohio is charged its proportionate share of corporate governance and other costs by an unconsolidated affiliate that is a consolidated affiliate of Duke Energy. Corporate governance and other shared services costs are primarily related to human resources, employee benefits, legal and accounting fees, as well as other third party costs. These amounts are recorded in Operation, Maintenance and Other within Operating Expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income. | |||||||||||
(b) | Duke Energy Ohio incurs expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, Maintenance and Other within Operating Expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income. | |||||||||||
(c) | Duke Energy Ohio records income associated with the rental of office space to a consolidated affiliate of Duke Energy, as well as its proportionate share of certain charged expenses from affiliates of Duke Energy. | |||||||||||
(d) | As discussed in Note 11, certain trade receivables have been sold by Duke Energy Ohio to CRC, an unconsolidated entity formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but do include a subordinated note from CRC for a portion of the purchase price. The interest income associated with the subordinated note is recorded in Other Income and Expenses, net on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
72
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
DECAMDuke Energy Commercial Asset Management (DECAM) is a non-regulated, direct subsidiary of Duke Energy Ohio. DECAM conducts business activities, including the execution of commodity transactions, and executing third party vendor and supply contracts as well asand service contracts, for certain of Duke Energy’s non-regulated entities. The commodity contracts that DECAM enters either do not qualify as hedges or have not been designatedare accounted for as hedges (hereinafter referred to as undersigned contracts),undesignated contracts, thus the mark-to-market impacts of these contracts are reflected in Duke Energy Ohio’s Condensed Consolidated Statements of Operations and Comprehensive Income. In addition, equal and offsetting mark-to-market impacts of intercompany contracts with non regulatednon-regulated entities are reflected in Duke Energy Ohio’s Condensed Consolidated Statements of Operations and Comprehensive Income representing the pass through of the economics of the original contracts to non-regulated entities in accordance with contractual arrangements between Duke Energy Ohio and non-regulated entities. See Note 8 for additional information. Because it is not a rated entity, DECAM receives its credit support from Duke Energy or its non-regulated subsidiaries and not the regulated utility operations of Duke Energy Ohio. DECAM meets its funding needs through an intercompany loan agreement from a subsidiary of Duke Energy. The intercompany loan agreement was executed in February 2011. An additional intercompany loan agreement was executed in October 2011 so that DECAM can also has the ability to loan money to the subsidiary of Duke Energy. DECAM had noan outstanding intercompany loan payable with the subsidiary of Duke Energy of $31 million and $79 million as of June 30, 2012 or December 31, 2011. DECAM had a $350 million and a $90 million intercompany loan receivable with the subsidiary of Duke Energy as of June 30, 20122013 and December 31, 2011,2012, respectively.
These amounts are recorded in Notes payable to affiliated companies on Duke Energy Ohio paid a $285 million dividend to its parent, Cinergy, in March 2011. In January 2012, Duke Energy Ohio recorded a non-cash equity transfer of $28 million related to the sale of Vermillion to Duke Energy Indiana. See Note 2 for further discussion.Ohio’s Condensed Consolidated Balance Sheets.
Duke Energy Indiana |
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| Balances due to and due from related parties included in the Condensed Consolidated Balance Sheets, which exclude assets or | ||||||||
liabilities associated with accrued pension and other post-retirement benefits, CRC and money pool arrangements, are presented in the following table. | |||||||||
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(in millions) |
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| June 30, 2012 |
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| December 31, 2011 | |||
Current assets |
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| Receivables |
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| $ | 16 |
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| $ | 18 |
| Other |
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| $ | 7 |
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| $ | 13 |
Non-current assets |
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| Other |
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| $ | 2 |
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| $ | 2 |
Current liabilities |
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| Accounts payable |
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| $ | (38) |
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| $ | (72) |
| Taxes accrued |
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| $ | ― |
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| $ | (25) |
| Other |
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| $ | (8) |
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| $ | ― |
Non-current liabilities |
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| Deferred income taxes |
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| $ | (835) |
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| $ | (927) |
| Other |
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| $ | (22) |
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| $ | (22) |
| As discussed further in Note 14, Duke Energy Indiana participates in Duke Energy’s qualified pension, non-qualified pension | ||||||||
and other post-retirement benefit plans and is allocated its proportionate share of expenses associated with these plans. Additionally, Duke Energy Indiana has been allocated accrued pension and other post-retirement benefit obligations as shown in the following table: | |||||||||
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(in millions) |
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| December 31, 2011 | |||
Other current liabilities |
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| $ | 2 |
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| $ | 2 | |
Accrued pension and other post-retirement benefit obligations |
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| 222 |
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| 231 | |
Total allocated accrued pension and other post-retirement benefit obligations |
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| $ | 224 |
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| $ | 233 |
| Amounts related to transactions with related parties included in the Condensed Consolidated Statements of Operations and | ||||||||||||
Comprehensive Income are presented in the following table: | |||||||||||||
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| Three Months Ended |
| Six Months Ended | ||||||||
(in millions) | June 30, 2012 |
| June 30, 2011 |
| June 30, 2012 |
| June 30, 2011 | ||||||
Corporate governance and shared service expenses(a) | $ | 98 |
| $ | 99 |
| $ | 199 |
| $ | 206 | ||
Indemnification coverages(b) | $ | 2 |
| $ | 2 |
| $ | 4 |
| $ | 4 | ||
Rental income and other charged expenses, net(c) | $ | ― |
| $ | 2 |
| $ | (1) |
| $ | 3 | ||
Interest expense on money pool(d) | $ | 1 |
| $ | ― |
| $ | 1 |
| $ | ― | ||
CRC interest income(e) | $ | 1 |
| $ | 3 |
| $ | 3 |
| $ | 7 | ||
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(a) | Duke Energy Indiana is charged its proportionate share of corporate governance and other costs by an unconsolidated affiliate that is a consolidated affiliate of Duke Energy. Corporate governance and other shared services costs are primarily related to human resources, employee benefits, legal and accounting fees, as well as other third party costs. These amounts are recorded in Operation, Maintenance and Other within Operating Expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income. | ||||||||||||
(b) | Duke Energy Indiana incurs expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly-owned captive insurance subsidiary. These expenses are recorded in Operation, Maintenance and Other within Operating Expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income. | ||||||||||||
(c) | Duke Energy Indiana records income associated with the rental of office space to a consolidated affiliate of Duke Energy, as well as its proportionate share of certain charged expenses from affiliates of Duke Energy. | ||||||||||||
(d) | Recorded in Interest Expense on the Condensed Consolidated Statements of Operations and Comprehensive Income. See Note 6 for additional information related to money pool. | ||||||||||||
(e) | As discussed in Note 11, certain trade receivables have been sold by Duke Energy Indiana to CRC, an unconsolidated entity formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but do include a subordinated note from CRC for a portion of the purchase price. The interest income associated with the subordinated note is recorded in Other Income and Expenses, net on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
73104
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
In January 2012, Duke Energy Indiana recorded a non-cash equity transfer of $26 million on the purchase of Vermillion from Duke Energy Ohio. See Note 2 for further discussion.
18. New Accounting StandardsNEW ACCOUNTING STANDARDS
The following new accounting standards were adopted by the Duke Energy Registrants subsequent to June 30, 20112012, and the impact of such adoption, if applicable, has been presented in the respectiveaccompanying Condensed Consolidated Financial Statements of the Duke Energy Registrants:Statements:
ASC 220 — Comprehensive Income. In June 2011, the FASB amended the existing requirements for presenting comprehensive income in financial statements primarily to increase the prominence of items reported in other comprehensive income (OCI) and to facilitate the convergence of U.S. GAAP and IFRS. Specifically, the revised guidance eliminates the option previously provided to present components of OCI as part of the statement of changes in stockholders’ equity. Accordingly, all non-owner changes in stockholders’ equity are required to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. For the Duke Energy Registrants, this revised guidance was effective on a retrospective basis for interim and annual periods beginning January 1, 2012. The adoption of this standard changed the presentation of the Duke Energy Registrants’ financial statements but did not affect the calculation of net income, comprehensive income or earnings per share.
ASC 820 — Fair Value Measurements and Disclosures. In May 2011, the FASB amended existing requirements for measuring fair value and for disclosing information about fair value measurements. This revised guidance results in a consistent definition of fair value, as well as common requirements for measurement and disclosure of fair value information between U.S. GAAP and International Financial Reporting Standards (IFRS). In addition, the amendments set forth enhanced disclosure requirements with respect to recurring Level 3 measurements, nonfinancial assets measured or disclosed at fair value, transfers between levels in the fair value hierarchy, and assets and liabilities disclosed but not recorded at fair value. For the Duke Energy Registrants, the revised fair value measurement guidance was effective on a prospective basis for interim and annual periods beginning January 1, 2012. The adoption of this new guidance did not have a significant impact on the Duke Energy Registrants disclosures or their consolidated results of operations, cash flows, or financial position.
ASC 350 — Intangibles–Goodwill and Other. In September 2011, the FASB amended existing goodwill impairment testing accounting guidance to provide an entity testing goodwill for impairment with the option of performing a qualitative assessment prior to calculating the fair value of a reporting unit in step one of a goodwill impairment test. Under this revised guidance, a qualitative assessment would require an evaluation of economic, industry, and company-specific considerations. If an entity determines, on a basis of such qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying value of a reporting unit, then step one and if necessary, step two of the impairment test must be performed. Otherwise, no further impairment testing would be required. The revised goodwill impairment testing accounting guidance is effective for the Duke Energy Registrants’ annual and interim goodwill impairment tests performed for fiscal years beginning January 1, 2012, with early adoption of this revised guidance permitted for annual and interim goodwill impairment tests performed as of a date before September 15, 2011. Since annual goodwill impairment tests are performed by Duke Energy as of August 31, the Duke Energy Registrants early adopted this revised accounting guidance during the third quarter of 2011 and applied that guidance to their annual goodwill impairment tests for 2011.
The following new Accounting Standards Updates (ASU) have been issued, but have not yet been adopted by Duke Energy, as of June 30, 2012.Board (FASB) Accounting Standards Codification (ASC) 210 — Balance Sheet
ASC 210—Balance Sheet. In December 2011,January 2013, the FASB issued revised accounting guidance to amend the existing disclosure requirements for offsetting financial assets and liabilities to enhance current disclosures, as well as to improve comparability of balance sheets prepared under U.S. GAAP and IFRS.International Financial Reporting Standards (IFRS). The revised disclosure guidance affects all companies that have financial instruments and derivative instruments that are either offset in the balance sheet (i.e., presented on a net basis) or subject to an enforceable master netting arrangement and/or similar agreement. The revised guidance requires that certain enhanced quantitative and qualitative disclosures be made with respect to a company’s netting arrangements and/or rights of setoff associated with its financial instruments and/or derivative instruments including associated collateral. For the Duke Energy Registrants, the revised disclosure guidance iswas effective on a retrospective basis for interim and annual periods beginning January 1, 2013. Other than additional disclosures, this revised guidance does not impact the consolidatedDuke Energy Registrants’ results of operations, cash flows or financial positionposition.
ASC 220 — Comprehensive Income
In February 2013, the FASB amended the existing requirements for presenting comprehensive income in financial statements to improve the reporting of reclassifications out of AOCI. The amendments in the guidance seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of AOCI on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of AOCI is reclassified to a balance sheet account (for example, property, plant and equipment) instead of directly to income or expense in the same reporting period. For the Duke Energy. Energy Registrants, this revised guidance was effective on a prospective basis for interim and annual periods beginning January 1, 2013. Other than additional disclosures and a change in the presentation of the consolidated statement of equity, this revised guidance does not impact the Duke Energy Registrants’ results of operations, cash flows or financial position.
The following new Accounting Standards Update (ASU) has been issued, but has not yet been adopted by Duke Energy, as of June 30, 2013.
ASC 830—Foreign Currency Matters. In March 2013, the FASB issued revised accounting guidance to resolve the diversity in practice about the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in substance real estate) within a foreign entity. In addition, the amendments resolve the diversity in practice for the release of the cumulative translation adjustment involving business combinations achieved in stages by either a Duke investor or a third party acquirer. For the Duke Energy Registrants, the revised accounting guidance is effective on a prospective basis for interim and annual periods beginning January 1, 2014. The revised guidance will impact the timing of the recognition of the cumulative translation adjustment for certain future transactions and therefore, could impact the Duke Energy Registrants’ results of operations, cash flows and financial position.
19. Subsequent EventsSUBSEQUENT EVENTS
For information on subsequent events related to acquisitions and sales of other assets, regulatory matters, commitments and contingencies, debt and earnings per sharecredit facilities, and income taxes, see Notes 2, 4, 5, 6 and 12,16, respectively.
74105
PART I
DUKE ENERGY CORPORATION - DUKE ENERGY CAROLINAS, LLC - DUKE ENERGY OHIO, INC. -
DUKE ENERGY INDIANA, INC.
Combined Notes To Unaudited Condensed Consolidated Financial Statements - (Continued)
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
INTRODUCTIONOPERATIONS
Duke EnergyDUKE ENERGY
Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the United States (U.S.) primarily through its wholly owned subsidiaries Duke Energy Carolinas, LLC (Duke Energy Carolinas), Duke Energy Progress, Inc. (Duke Energy Progress) (formerly Carolina Power & Light Company d/b/a Progress Energy Carolinas), Duke Energy Florida, Inc. (Duke Energy Florida) (formerly Florida Power Corporation d/b/a Progress Energy Florida, Inc.), Duke Energy Ohio, Inc. (Duke Energy Ohio), which includes Duke Energy Kentucky, Inc. (Duke Energy Kentucky), and Duke Energy Indiana, Inc. (Duke Energy Indiana), as well as in Latin America through International Energy.
When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its six separate subsidiary registrants, Duke Energy Carolinas, Progress Energy, Inc. (Progress Energy), Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
On July 2, 2012, Duke Energy merged with Progress Energy, with Duke Energy continuing as the surviving corporation, and Progress Energy becoming a wholly owned subsidiary of Duke Energy. Duke Energy Progress and Duke Energy Florida, Progress Energy’s regulated utility subsidiaries, are now indirect wholly owned subsidiaries of Duke Energy. Duke Energy’s Condensed Consolidated Financial Statements include Progress Energy, Duke Energy Progress and Duke Energy Florida activity beginning July 2, 2012.
Progress Energy’s shareholders received 0.87083 shares of Duke Energy common stock in exchange for each share of Progress Energy common stock outstanding as of July 2, 2012. Generally, all outstanding Progress Energy equity-based compensation awards were converted into Duke Energy equity-based compensation awards using the same ratio. See Note 2 to the Condensed Consolidated Financial Statements, “Acquisitions, Dispositions and Sales of Other Assets,” for information related to the merger with Progress Energy.
Management’s Discussion and Analysis includes financial information prepared in accordance with generally accepted accounting principles (GAAP) in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings and adjusted diluted earnings per share (EPS), discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.
When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its three separate subsidiary registrants, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants. The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana. However, none of the registrants makes any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself. The Duke Energy Registrants, as defined above, does not include Progress Energy, Inc., Progress Energy Carolinas or Progress Energy Florida, unless otherwise noted.
Management’s Discussion and Analysis should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and Notes.
MergerNotes and in conjunction with Progress Energy
Description of Transaction
On July 2, 2012, Duke Energy completed the merger contemplated by the Agreement and Plan of Merger (Merger Agreement), among Diamond Acquisition Corporation, a North Carolina corporation and Duke Energy’s wholly owned subsidiary (Merger Sub) and Progress Energy, Inc. (Progress Energy), a North Carolina corporation engaged in the regulated utility business of generation, transmission and distribution and sale of electricity in portions of North Carolina, South Carolina and Florida. As a result of the merger, Merger Sub was merged into Progress Energy and Progress Energy became a wholly owned subsidiary of Duke Energy.
The merger between Duke Energy and Progress Energy provides increased scale and diversity with potentially enhanced access to capital over the long-term and a greater ability to undertake the significant construction programs necessary to respond to increasing environmental regulation, plant retirements and customer demand growth. Duke Energy’s business risk profile is expected to improve over-time due to the increased proportion of the business that is regulated. Additionally, cost savings, efficiencies and other benefits are expected from the combined operations.
Immediately preceding the merger, Duke Energy completed a one-for-three reverse stock split with respect to the issued and outstanding shares of Duke Energy common stock. The shareholders of Duke Energy approved the reverse stock split at Duke Energy’s special meeting of shareholders heldAnnual Report on August 23, 2011. All share and per share amounts presented herein reflect the impact of the one-for-three reverse stock split.
Progress Energy’s shareholders received 0.87083 shares of Duke Energy common stock in exchange for each share of Progress Energy common stock outstanding as of July 2, 2012. Generally, all outstanding Progress Energy equity-based compensation awards were converted into Duke Energy equity-based compensation awards using the same ratio. The merger was structured as a tax-free exchange of shares.
Merger Related Regulatory Matters
Federal Energy Regulatory Commission (FERC).On June 8, 2012, the FERC conditionally approved the merger including Duke Energy and Progress Energy’s revised market power mitigation plan, the Joint Dispatch Agreement (JDA) and the joint Open Access Transmission Tariff (OATT). The revised market power mitigation plan providesForm 10-K for the construction of seven transmission projects (Long-term FERC Mitigation) and interim firm power sale agreements during the construction of the transmission projects (Interim FERC Mitigation). The Long-term FERC Mitigation is estimated to cost approximately $110 million, excluding one project previously planned to be constructed by Progress Energy Carolinas. The Long-term FERC Mitigation plan will increase power imported into the Duke Energy Carolinas and Progress Energy Carolinas service areas and enhance competitive power supply options in the service areas. The construction of these projects will occur over the next two to three years. In conjunction with the Interim FERC Mitigation plan, Duke Energy Carolinas and Progress Energy Carolinas entered into power sale agreements that were effective with the consummation of the merger. These agreements, or similar power sale agreements, will be in place until the Long-term FERC Mitigation is operational. The agreements are for around the clock delivery of power during the winter and summer in quantities that vary by season and by peak period.
The FERC order requires an independent party to monitor whether the power sale agreements remain in effect during construction of the transmission projects and provide quarterly reports to the FERC regarding the status of construction of the transmission projects.
·On June 25, 2012, Duke Energy and Progress Energy accepted the conditions imposed by the FERC.
·On July 10, 2012, certain intervenors requested a rehearing seeking to overturn the June 8, 2012 order by the FERC.
North Carolina Utilities Commission (NCUC) and Public Service Commission of South Carolina (PSCSC). In September 2011, Duke Energy and Progress Energy reached settlements with the Public Staff of the North Carolina Utilities Commission (NC Public Staff) and the South Carolina Office of Regulatory Staff (ORS) and certain other interested parties in connection with the regulatory proceedings related to the merger, the JDA and the OATT that were pending before the NCUC and PSCSC. These settlements were updated in May 2012 to reflect the results of ongoing merger related applications pending before the FERC. As part of these settlements and the application for approval of the merger by the NCUC and PSCSC, Duke Energy Carolinas and Progress Energy Carolinas agreed to the conditions and obligations listed below.year ended December 31, 2012.
75
PART I
·Guarantee of $650 million in system fuel and fuel-related savings over 60 to 78 months for North Carolina and South Carolina retail customers. The savings are expected to be achieved through coal blending, coal commodity and transportation savings, gas transportation savings and the joint dispatch of Duke Energy Carolinas and Progress Energy Carolinas generation fleets.
·Duke Energy Carolinas and Progress Energy Carolinas will not seek recovery from retail customers for the cost of Long-term FERC Mitigation for five years following merger consummation. After five years, Duke Energy Carolinas and Progress Energy Carolinas may seek to recover the costs of the Long-term FERC Mitigation, but must show that the projects are needed to provide adequate and reliable retail service regardless of the merger.
·A $65 million rate reduction over the term of the Interim FERC Mitigation to reflect the cost of capacity not available to Duke Energy Carolinas and Progress Energy Carolinas retail customers during the Interim FERC Mitigation. The rate reduction will be achieved through a rider and will be apportioned between Duke Energy Carolinas and Progress Energy Carolinas retail customers.
·Duke Energy Carolinas and Progress Energy Carolinas will not seek recovery from retail customers for any revenue shortfalls or fuel-related costs associated with the Interim FERC Mitigation. The Interim FERC Mitigation agreements were in a loss position for Duke Energy as of the date of the merger consummation.
·Duke Energy Carolinas and Progress Energy Carolinas will not seek recovery from retail customers for any of their allocable share of merger related severance costs.
·Duke Energy Carolinas and Progress Energy Carolinas will provide community support through charitable contributions for four years, workforce development, low income energy assistance, and green energy assistance at a total cost of approximately $100 million, which cannot be recovered from retail customers.
·Duke Energy Carolinas and Progress Energy Carolinas will abide by revised North Carolina Regulatory Conditions and Code of Conduct governing their operations.
On June 29, 2012, the NCUC approved the merger application and the JDA application with conditions that were reflective of the settlement agreements described above. On July 2, 2012, the PSCSC approved the JDA application subject to Duke Energy Carolinas and Progress Energy Carolinas providing their South Carolina retail customers pro rata benefits equivalent to those approved by the NCUC in its merger approval order.
On July 6, 2012, the NCUC issued an order initiating investigation and scheduling hearings on the Duke Energy board of directors’ decision on July 2, 2012, to replace William D. Johnson with James E. Rogers as president and CEO of Duke Energy subsequent to the merger close. See Note 4 for further information.
Kentucky Public Service Commission. On June 24, 2011, Duke Energy and Progress Energy filed a settlement agreement with the Kentucky Attorney General. On August 2, 2011, the KPSC issued an order conditionally approving the merger and required Duke Energy and Progress Energy to accept all conditions contained in the order. Duke Energy and Progress Energy requested and were granted rehearing on the limited issue of the wording of one condition relating to the composition of Duke Energy’s post-merger board of directors. On October 28, 2011, the KPSC issued its order approving a settlement with the Kentucky Attorney General on the revised condition relating to the composition of the post-merger Duke Energy board. Duke Energy and Progress Energy filed their acceptance of the condition on November 2, 2011. Duke Energy Kentucky agreed to (i) not file new gas or electric base rate applications for two years from the date of the KPSC’s final order in the merger proceedings, (ii) make five annual shareholder contributions of $165,000 each to support low-income weatherization efforts and economic development within Duke Energy Kentucky’s service territory and (iii) not seek recovery from retail customers for any of their allocable share of merger related costs.
Accounting Charges to be Recognized Related to the Merger Consummation
Duke Energy anticipates recording charges of approximately $450 million to $550 million in the second half of 2012 associated with the merger. This estimate includes the costs of the Long-term FERC Mitigation plan, Interim FERC Mitigation, the retail rate reduction associated with Interim FERC Mitigation, employee severance, obligations to provide community support and merger transaction expenses. The majority of these charges will be recognized by Duke Energy Carolinas and Progress Energy Carolinas. See Note 15 for further information related to employee severance expenses.
Duke Energy also expects to incur significant system integration and other merger-related transition costs primarily through 2014 that are necessary in order to achieve certain cost savings, efficiencies and other benefits anticipated to result from the merger with Progress Energy.
RESULTS OF OPERATIONS
In this section, Duke Energy provides analysis and discussion of earnings and factors affecting earnings on a both a GAAP and non-GAAP basis.
Management evaluates financial performance in part based on the non-GAAP financial measure,measures, adjusted earnings and adjusted diluted EPS, which are measured as income from continuing operations after deducting income attributable to noncontrolling interests, adjusted for the dollar and per-shareper share impact of special items and the mark-to-market impacts of economic hedges in the Commercial Power segment. Special items represent certain charges and credits, which management believes will not be recurring on a regular basis, although it is reasonably possible such charges and credits could recur. Mark-to-market adjustments reflect the mark-to-market impact of derivative contracts, which are used in Duke Energy’s hedging of a portion of the economic value of its generation assets in the Commercial Power segment. The mark-to-market impact of the derivative contracts is recognized in GAAP earnings immediately as such derivative contracts do not qualify for hedge accounting or regulatory accounting treatment, used in Duke Energy’s hedging of a portion of economic value of its generation assets in the Commercial Power segment.treatment. The economic value of the generation assets is subject to fluctuations in fair value due to market price volatility of the input and output commodities (e.g., coal, power)electricity, natural gas) and as such the economic hedging involves both purchases and sales of those input and output commodities related to the generation assets. Because the operations of the generation assets are accounted for under the accrual method, management believes that excluding the impactimpacts of mark-to-market changes of the economic hedge contracts from operating earnings until settlement better matches the financial impacts of the hedge contract with the portion of economic value of the underlying hedged asset. Management believes that the presentation of adjusted earnings and adjusted diluted EPS provideprovides useful information to investors, as it provides them an additional relevant comparison of Duke Energy’s performance across periods. Management uses these non-GAAP financial measures for planning and forecasting and for reporting results to the Board of Directors, employees, shareholders, analysts and investors concerning Duke Energy’s financial performance. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are net incomeNet Income Attributable to Duke Energy Corporation and dilutedDiluted EPS attributable to Duke Energy Corporation common shareholders, which include the dollar and per-shareper share impact of special items, the mark-to-market impacts of economic hedges in the Commercial Power segment and discontinued operations.
Executive Overview
Reconciliations of adjusted earnings to GAAP Net Income Attributable to Duke Energy Corporation and adjusted diluted EPS to GAAP diluted EPS Attributable to Duke Energy Corporation common shareholders (amounts are net of tax) follow.
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| Three Months Ended June 30, | |||||||||||||||||||||||||||
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| 2013 |
| 2012 | |||||||||||||||||||||||||
(in millions, except per share amounts) | Amount |
| Per diluted share |
| Amount |
| Per diluted share | ||||||||||||||||||||||
Adjusted earnings | $ | 617 |
| $ | 0.87 |
| $ | 456 |
| $ | 1.02 | ||||||||||||||||||
Crystal River Unit 3 impairment |
| (180) |
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| (0.26) |
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| - |
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| - | ||||||||||||||||||
Nuclear development charges |
| (57) |
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| (0.08) |
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| - |
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| - | ||||||||||||||||||
Costs to achieve Progress Energy merger |
| (51) |
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| (0.07) |
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| (7) |
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| (0.02) | ||||||||||||||||||
Litigation reserve |
| (31) |
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| (0.04) |
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| - |
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| - | ||||||||||||||||||
Economic hedges (mark-to-market) |
| 44 |
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| 0.06 |
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| (4) |
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| (0.01) | ||||||||||||||||||
Income from discontinued operations |
| (3) |
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| - |
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| (1) |
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| - | ||||||||||||||||||
Net income attributable to Duke Energy | $ | 339 |
| $ | 0.48 |
| $ | 444 |
| $ | 0.99 | ||||||||||||||||||
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76106
PART I
The following tables reconcilevariance in adjusted earnings to GAAP net income attributable to Duke Energy and adjusted diluted EPS to GAAP diluted EPS attributable to Duke Energy:
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| Three Months Ended June 30, | |||||||||
|
| 2012 |
|
| 2011 | ||||||
(in millions, except per-share amounts) |
| Amount |
|
| EPS |
|
| Amount |
|
| EPS |
Total Adjusted Earnings | $ | 456 |
| $ | 1 |
| $ | 439 |
| $ | 1 |
Economic Hedges (Mark-to-Market), net of tax |
| (4) |
|
| (0) |
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| ― |
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| ― |
Costs to Achieve Progress Energy Merger, net of tax |
| (7) |
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| (0) |
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| (4) |
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| (0) |
Income from Discontinued Operations, net of tax |
| (1) |
|
| ― |
|
| ― |
|
| ― |
Net Income Attributable to Duke Energy | $ | 444 |
| $ | 0.99 |
| $ | 435 |
| $ | 0.98 |
Forfor the three months ended June 30, 2012, adjusted earnings attributable to Duke Energy were $456 million, or $1.02 per diluted share,2013, compared to adjusted earnings of $439 million or $0.99 per diluted share, for the same period in 2011. The increase as compared to the prior period2012, was primarily due to:
· ImplementationThe inclusion of revised rates in North Carolina and South Carolina,
·Lower operation and maintenance costs; and
·Midwest coal stability charge revenues.Progress Energy results beginning July 2, 2012.
Partially offset by:
· Lower non-regulated Midwest coalresults in the nonregulated generation volumes and margin, net of 2012businesses due to lower PJM Interconnection, LLC (PJM) capacity revenues,
·Higher depreciation and amortization expense,prices;
· Unfavorable resultsweather in Central America,2013 compared to 2012; and
· Unfavorable weather.impact of an extended planned maintenance outage at National Methanol Company;
·Incremental shares issued to complete the Progress Energy merger (impacts per diluted share amounts only).
| Six Months Ended June 30, | ||||||||||
|
| 2012 |
|
| 2011 | ||||||
(in millions, except per-share amounts) |
| Amount |
|
| EPS |
|
| Amount |
|
| EPS |
Total Adjusted Earnings | $ | 962 |
| $ | 2.16 |
| $ | 962 |
| $ | 2.17 |
Economic Hedges (Mark-to-Market), net of tax |
| (3) |
|
| (0.01) |
|
| (3) |
|
| (0.01) |
Edwardsport Impairment, net of tax |
| (268) |
|
| (0.60) |
|
| ― |
|
| ― |
Voluntary Opportunity Plan Deferral, net of tax |
| 60 |
|
| 0.13 |
|
| ― |
|
| ― |
Costs to Achieve Progress Energy Merger, net of tax |
| (13) |
|
| (0.03) |
|
| (13) |
|
| (0.03) |
Income from Discontinued Operations, net of tax |
| 1 |
|
| ― |
|
| ― |
|
| ― |
Net Income Attributable to Duke Energy | $ | 739 |
| $ | 1.65 |
| $ | 946 |
| $ | 2.13 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Six Months Ended June 30, | |||||||||||||||||||||||||||
|
| 2013 |
| 2012 | |||||||||||||||||||||||||
(in millions, except per share amounts) | Amount |
| Per diluted share |
| Amount |
| Per diluted share | ||||||||||||||||||||||
Adjusted earnings | $ | 1,333 |
| $ | 1.89 |
| $ | 962 |
| $ | 2.16 | ||||||||||||||||||
Crystal River Unit 3 impairment |
| (180) |
|
| (0.26) |
|
| - |
|
| - | ||||||||||||||||||
Costs to achieve Progress Energy merger |
| (85) |
|
| (0.13) |
|
| (13) |
|
| (0.03) | ||||||||||||||||||
Nuclear development charges |
| (57) |
|
| (0.08) |
|
| - |
|
| - | ||||||||||||||||||
Litigation reserve |
| (31) |
|
| (0.04) |
|
| - |
|
| - | ||||||||||||||||||
Economic hedges (mark-to-market) |
| (4) |
|
| (0.01) |
|
| (3) |
|
| (0.01) | ||||||||||||||||||
Edwardsport charges |
| - |
|
| - |
|
| (268) |
|
| (0.60) | ||||||||||||||||||
Voluntary Opportunity Plan deferral |
| - |
|
| - |
|
| 60 |
|
| 0.13 | ||||||||||||||||||
Income from discontinued operations |
| (3) |
|
| - |
|
| 1 |
|
| - | ||||||||||||||||||
Net income attributable to Duke Energy | $ | 973 |
| $ | 1.37 |
| $ | 739 |
| $ | 1.65 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
For theThe variance in adjusted earnings for six months ended June 30, 2012, adjusted earnings attributable to Duke Energy were $962 million, or $2.16 per diluted share,2013, compared to adjusted earnings of $962 million or $2.17 per diluted share, for the same period in 2011. The activity as compared to the prior period is2012, was primarily due to:
· Unfavorable weather across all jurisdictions,
·Lower non-regulated Midwest coal generation volumes and margin, netThe inclusion of 2012 capacity revenues,Progress Energy results beginning July 2, 2012; and
· Higher depreciation and amortization.Favorable weather in 2013 compared to 2012.
Partially offset by:
· Implementation of revised ratesLower results in North CarolinaLatin America due to lower sales volumes, higher purchased power costs and South Carolina,unfavorable foreign exchange rates;
· Lower operation and maintenance costs,results in the nonregulated generation businesses due to lower PJM capacity prices; and
· Midwest coal stability charge.Incremental shares issued to complete the Progress Energy merger (impacts per diluted share amounts only).
Segment Results
Effective with the first quarter of 2012, management began evaluatingManagement 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,income, as discussed below, includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. In conjunctionManagement also uses adjusted segment income as a measure of historical and anticipated future segment performance. Adjusted segment income is a non-GAAP financial measure, as it is based upon segment income adjusted for special items and the mark-to-market impact of economic hedges in the Commercial Power segment. Management believes that the presentation of adjusted segment income provides useful information to investors, as it provides them with management’s usean additional relevant comparison of a segment’s performance across periods. The most directly comparable GAAP measure for adjusted segment income is segment income, which represents segment income from continuing operations, including any special items and the new reporting measure, certain governance costs that were previously unallocated have now been allocated to eachmark-to-market impact of economic hedges in the segments. In addition, direct interest expense and income taxes are included in segment income. Prior year financial information has been recast to conform to the current year presentation. None of these changes impacts the reportable operating segments or the Duke Energy Registrants’ previously reported consolidated revenues, net income or EPS.Commercial Power segment.
See Note 3 to the Unaudited Condensed Consolidated Financial Statements, “Business Segments,” for a discussion of Duke Energy’s segment structure.
77
PART I
Duke Energy’s segment income and adjusted segment income may not be comparable to a similarly titled measuremeasures of another company because other entities may not calculate segment income or adjusted segment income in the same manner. SegmentThe following tables reconcile adjusted segment income is summarized in the following table,to segment income, and detailed discussions follow.
Net Income Attributable to Duke Energy Corporation (amounts are net of tax).
Segment Income by Business Segment |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||
(in millions) |
| 2012 |
| 2011 |
|
| 2012 |
| 2011 | ||||
USFE&G |
| $ | 337 |
| $ | 297 |
| $ | 473 |
| $ | 638 | |
Commercial Power |
|
| 28 |
|
| 30 |
|
| 59 |
|
| 79 | |
International Energy |
|
| 105 |
|
| 127 |
|
| 247 |
|
| 255 | |
Total reportable segment net income |
|
| 470 |
|
| 454 |
|
| 779 |
|
| 972 | |
Other |
|
| (25) |
|
| (19) |
|
| (41) |
|
| (26) | |
Discontinued Operations |
|
| (1) |
|
| ― |
|
| 1 |
|
| ― | |
Net Income Attributable to Duke Energy |
| $ | 444 |
| $ | 435 |
| $ | 739 |
| $ | 946 | |
USFE&G |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| USFE&G includes the regulated operations of Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana. | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||||
|
|
|
|
|
|
|
| Increase |
|
|
|
|
|
|
| Increase | ||
(in millions, except where noted) | 2012 |
| 2011 |
| (Decrease) |
| 2012 |
| 2011 |
| (Decrease) | |||||||
Operating revenues | $ | 2,697 |
| $ | 2,549 |
| $ | 148 |
| $ | 5,365 |
| $ | 5,232 |
| $ | 133 | |
Operating expenses |
| 2,099 |
|
| 2,042 |
|
| 57 |
|
| 4,481 |
|
| 4,123 |
|
| 358 | |
Gains on sales of other assets and other, net |
| 3 |
|
| 1 |
|
| 2 |
|
| 7 |
|
| 1 |
|
| 6 | |
Operating income |
| 601 |
|
| 508 |
|
| 93 |
|
| 891 |
|
| 1,110 |
|
| (219) | |
Other income and expenses, net |
| 62 |
|
| 67 |
|
| (5) |
|
| 124 |
|
| 129 |
|
| (5) | |
Interest expense |
| 143 |
|
| 134 |
|
| 9 |
|
| 289 |
|
| 274 |
|
| 15 | |
Income before income taxes |
| 520 |
|
| 441 |
|
| 79 |
|
| 726 |
|
| 965 |
|
| (239) | |
Income tax expense |
| 183 |
|
| 144 |
|
| 39 |
|
| 253 |
|
| 327 |
|
| (74) | |
Segment Income | $ | 337 |
| $ | 297 |
| $ | 40 |
| $ | 473 |
| $ | 638 |
| $ | (165) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duke Energy Carolinas’ GWh sales(a) |
| 19,574 |
|
| 20,210 |
|
| (636) |
|
| 39,035 |
|
| 40,794 |
|
| (1,759) | |
Duke Energy Midwest’s GWh sales(a)(b) |
| 14,234 |
|
| 13,917 |
|
| 317 |
|
| 28,557 |
|
| 28,689 |
|
| (132) | |
Net proportional MW capacity in operation(c) |
|
|
|
|
|
|
|
|
|
| 27,145 |
|
| 26,907 |
|
| 238 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Gigawatt-hours (GWh). | |||||||||||||||||
(b) | Duke Energy Ohio (Ohio transmission and distribution only), Duke Energy Indiana and Duke Energy Kentucky collectively | |||||||||||||||||
| referred to as Duke Energy Midwest within this USFE&G segment discussion. | |||||||||||||||||
(c) | Megawatt (MW). |
| The following table shows the percent changes in GWh sales and average number of customers for the current three | |||||
and six month periods compared to the same periods in the prior year. Except as otherwise noted, the below percentages represent billed sales only and are not weather normalized. | ||||||
|
|
|
|
|
|
|
Duke Energy Carolinas |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
Increase (decrease) over prior year | June 30, 2012 |
| June 30, 2012 | |||
Residential sales(a) | (8.2%) |
| (11.5%) | |||
General service sales(a) | (0.1%) |
| (0.8%) | |||
Industrial sales(a) | 1.2% |
| 1.5% | |||
Wholesale power sales | (16.8%) |
| (17.8%) | |||
Total Duke Energy Carolinas sales(b) | (3.1%) |
| (4.3%) | |||
Average number of customers | 0.6% |
| 0.5% | |||
|
|
|
|
|
|
|
(a) | Major components of Duke Energy Carolinas’ retail sales. | |||||
(b) | Consists of all components of Duke Energy Carolinas’ sales, including all billed and unbilled retail sales, and wholesale | |||||
| sales to incorporated municipalities and to public and private utilities and power marketers. | |||||
|
|
|
|
|
|
|
Duke Energy Midwest |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
Increase (decrease) over prior year | June 30, 2012 |
| June 30, 2012 | |||
Residential sales(a) | (5.6%) |
| (9.3%) | |||
General service sales(a) | (0.8%) |
| (2.8%) | |||
Industrial sales(a) | 2.0% |
| 2.1% | |||
Wholesale power sales | 3.3% |
| (0.1%) | |||
Total Duke Energy Midwest sales(b) | 2.3% |
| (0.5%) | |||
Average number of customers | 0.5% |
| 0.5% | |||
|
|
|
|
|
|
|
(a) | Major components of Duke Energy Midwest’s retail sales. | |||||
(b) | Consists of all components of Duke Energy Midwest’s sales, including all billed and unbilled retail sales, and wholesale sales | |||||
| to incorporated municipalities and to public and private utilities and power marketers. |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Three Months Ended June 30, 2013 | ||||||||||||||||||||||||||||
(in millions) | USFE&G | Commercial Power | International Energy | Total Reportable Segments | Other | Duke Energy | ||||||||||||||||||||||||
Adjusted segment income | $ | 590 | $ | (3) | $ | 87 | $ | 674 | $ | (57) | $ | 617 | ||||||||||||||||||
Crystal River Unit 3 impairment |
| (180) |
| - |
| - |
| (180) |
| - |
| (180) | ||||||||||||||||||
Nuclear development charges |
| (57) |
| - |
| - |
| (57) |
| - |
| (57) | ||||||||||||||||||
Costs to achieve Progress Energy merger |
| - |
| - |
| - |
| - |
| (51) |
| (51) | ||||||||||||||||||
Litigation reserve |
| - |
| - |
| - |
| - |
| (31) |
| (31) | ||||||||||||||||||
Mark-to-market impact of economic hedges |
| - |
| 44 |
| - |
| 44 |
| - |
| 44 | ||||||||||||||||||
Segment income (loss) | $ | 353 | $ | 41 | $ | 87 | $ | 481 | $ | (139) |
| 342 | ||||||||||||||||||
Loss from Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
| (3) | ||||||||||||||||||
Net Income Attributable to Duke Energy Corporation |
|
|
|
|
|
|
|
|
|
| $ | 339 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Three Months Ended June 30, 2012 | ||||||||||||||||||||||||||||
(in millions) | USFE&G | Commercial Power | International Energy | Total Reportable Segments | Other | Duke Energy | ||||||||||||||||||||||||
Adjusted segment income | $ | 337 | $ | 32 | $ | 105 | $ | 474 | $ | (18) | $ | 456 | ||||||||||||||||||
Costs to achieve Progress Energy merger |
| - |
| - |
| - |
| - |
| (7) |
| (7) | ||||||||||||||||||
Mark-to-market impact of economic hedges |
| - |
| (4) |
| - |
| (4) |
| - |
| (4) | ||||||||||||||||||
Segment income | $ | 337 | $ | 28 | $ | 105 | $ | 470 | $ | (25) |
| 445 | ||||||||||||||||||
Loss from Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
| (1) | ||||||||||||||||||
Net Income Attributable to Duke Energy Corporation |
|
|
|
|
|
|
|
|
|
| $ | 444 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Six Months Ended June 30, 2013 | ||||||||||||||||||||||||||||
(in millions) | USFE&G | Commercial Power | International Energy | Total Reportable Segments | Other | Duke Energy | ||||||||||||||||||||||||
Adjusted segment income | $ | 1,246 | $ | 3 | $ | 184 | $ | 1,433 | $ | (100) | $ | 1,333 | ||||||||||||||||||
Crystal River Unit 3 impairment |
| (180) |
| - |
| - |
| (180) |
| - |
| (180) | ||||||||||||||||||
Costs to achieve Progress Energy merger |
| - |
| - |
| - |
| - |
| (85) |
| (85) | ||||||||||||||||||
Nuclear development charges |
| (57) |
| - |
| - |
| (57) |
| - |
| (57) | ||||||||||||||||||
Litigation reserve |
| - |
| - |
| - |
| - |
| (31) |
| (31) | ||||||||||||||||||
Mark-to-market impact of economic hedges |
| - |
| (4) |
| - |
| (4) |
| - |
| (4) | ||||||||||||||||||
Segment income (loss) | $ | 1,009 | $ | (1) | $ | 184 | $ | 1,192 | $ | (216) |
| 976 | ||||||||||||||||||
Loss from Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
| (3) | ||||||||||||||||||
Net Income Attributable to Duke Energy Corporation |
|
|
|
|
|
|
|
|
|
| $ | 973 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Six Months Ended June 30, 2012 | ||||||||||||||||||||||||||||
(in millions) | USFE&G | Commercial Power | International Energy | Total Reportable Segments | Other | Duke Energy | ||||||||||||||||||||||||
Adjusted segment income | $ | 681 | $ | 62 | $ | 247 | $ | 990 | $ | (28) | $ | 962 | ||||||||||||||||||
Edwardsport impairment |
| (268) |
| - |
| - |
| (268) |
| - |
| (268) | ||||||||||||||||||
Costs to achieve Progress Energy merger |
| - |
| - |
| - |
| - |
| (13) |
| (13) | ||||||||||||||||||
Mark-to-market impact of economic hedges |
| - |
| (3) |
| - |
| (3) |
| - |
| (3) | ||||||||||||||||||
Voluntary Opportunity Plan deferral |
| 60 |
| - |
| - |
| 60 |
| - |
| 60 | ||||||||||||||||||
Segment income | $ | 473 | $ | 59 | $ | 247 | $ | 779 | $ | (41) |
| 738 | ||||||||||||||||||
Income from Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
| 1 | ||||||||||||||||||
Net Income Attributable to Duke Energy Corporation |
|
|
|
|
|
|
|
|
|
| $ | 739 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
78107
PART I
The remaining information presented through this discussion of results of operations is presented on a GAAP basis.
U.S. FRANCHISED ELECTRIC AND GAS (USFE&G)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance |
| 2013 |
| 2012 |
| Variance | |||||||||||||||||||||||||||||||||||||||||||
Operating Revenues | $ | 4,920 |
| $ | 2,697 |
| $ | 2,223 |
| $ | 9,980 |
| $ | 5,365 |
| $ | 4,615 | |||||||||||||||||||||||||||||||||||||
Operating Expenses |
| 4,165 |
|
| 2,099 |
|
| 2,066 |
|
| 8,005 |
|
| 4,481 |
|
| 3,524 | |||||||||||||||||||||||||||||||||||||
Gains on Sales of Other Assets and Other, net |
| 4 |
|
| 3 |
|
| 1 |
|
| 6 |
|
| 7 |
|
| (1) | |||||||||||||||||||||||||||||||||||||
Operating Income |
| 759 |
|
| 601 |
|
| 158 |
|
| 1,981 |
|
| 891 |
|
| 1,090 | |||||||||||||||||||||||||||||||||||||
Other Income and Expenses, net |
| 48 |
|
| 62 |
|
| (14) |
|
| 109 |
|
| 124 |
|
| (15) | |||||||||||||||||||||||||||||||||||||
Interest Expense |
| 242 |
|
| 143 |
|
| 99 |
|
| 478 |
|
| 289 |
|
| 189 | |||||||||||||||||||||||||||||||||||||
Income Before Income Taxes |
| 565 |
|
| 520 |
|
| 45 |
|
| 1,612 |
|
| 726 |
|
| 886 | |||||||||||||||||||||||||||||||||||||
Income Tax Expense |
| 212 |
|
| 183 |
|
| 29 |
|
| 603 |
|
| 253 |
|
| 350 | |||||||||||||||||||||||||||||||||||||
Segment Income | $ | 353 |
| $ | 337 |
| $ | 16 |
| $ | 1,009 |
| $ | 473 |
| $ | 536 | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Duke Energy Carolinas GWh sales(a)(b) |
| 20,202 |
|
| 19,574 |
|
| 628 |
|
| 42,448 |
|
| 39,035 |
|
| 3,413 | |||||||||||||||||||||||||||||||||||||
Duke Energy Progress GWh sales(a)(c)(d) |
| 14,055 |
|
| 13,466 |
|
| 589 |
|
| 28,756 |
|
| 26,634 |
|
| 2,122 | |||||||||||||||||||||||||||||||||||||
Duke Energy Florida GWh sales(a)(e) |
| 9,853 |
|
| 9,938 |
|
| (85) |
|
| 17,869 |
|
| 18,349 |
|
| (480) | |||||||||||||||||||||||||||||||||||||
Duke Energy Ohio GWh sales(a) |
| 5,800 |
|
| 5,942 |
|
| (142) |
|
| 11,978 |
|
| 11,796 |
|
| 182 | |||||||||||||||||||||||||||||||||||||
Duke Energy Indiana GWh sales(a) |
| 7,937 |
|
| 8,292 |
|
| (355) |
|
| 16,442 |
|
| 16,761 |
|
| (319) | |||||||||||||||||||||||||||||||||||||
Total USFE&G GWh sales |
| 57,847 |
|
| 57,212 |
|
| 635 |
|
| 117,493 |
|
| 112,575 |
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| 4,918 | |||||||||||||||||||||||||||||||||||||
Net proportional MW capacity in operation(f) |
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| 49,560 |
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| 27,145 |
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| 22,415 | |||||||||||||||||||||||||||||||||||||
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(a) | Gigawatt-hours (GWh). | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | Includes 168 and 352 GWh sales associated with interim firm power sale agreements (Interim FERC Mitigation) entered into as part of FERC's approval of the merger with Progress Energy, which are not included in the operating results in the table above, for the three and six months ended June 30, 2013, respectively. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions, Dispositions and Sales of Other Assets," for a discussion of the Interim FERC Mitigation. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(c) | Includes 303 GWh sales associated with the Interim FERC Mitigation, which are not included in the operating results in the table above, for both the three and six months ended June 30, 2013. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions, Dispositions and Sales of Other Assets," for a discussion of the Interim FERC Mitigation. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(d) | All of Duke Energy Progress' GWh sales for the six months ended June 30, 2012 occurred prior to the merger between Duke Energy and Progress Energy. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(e) | All of Duke Energy Florida's GWh sales for the six months ended June 30, 2012 occurred prior to the merger between Duke Energy and Progress Energy. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(f) | Megawatt (MW). | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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108
PART I
Three Months Ended June 30, 20122013 as Compared to June 30, 20112012
Operating Revenues. The increasevariance was driven primarily by:
· A $111$2,222 million increase in operating revenues due to the inclusion of Progress Energy operating revenues beginning in July 2012, and
·A $44 million net increase in retail rates and rate riders primarily due to updates to the riders, and in retail pricing.
Partially offsetting these increases were:
·A $48 million decrease in electric sales (net of fuel revenue) to retail customers due to less favorable weather conditions in the second quarter of 2013 compared to the same period in 2012. For the Carolinas, cooling degree days for the second quarter of 2013 were 15 percent below normal as compared to 5 percent above normal during the same period in 2012. For Indiana and Ohio, cooling degree days for the second quarter of 2013 were 1 percent below normal as compared to 37 percent above normal during the same period in 2012, and
· A $24 million decrease in fuel revenues (including emission allowances) driven primarily by decreased demand from electric retail customers in the second quarter of 2013 compared to the same period in 2012 mainly due to less favorable weather conditions, lower fuel rates for electric retail customers in all jurisdictions, and lower revenues for purchases of power in the Carolinas and Ohio. Fuel revenues represent sales to retail and wholesale customers.
Operating Expenses.The variance was driven primarily by:
·A $1,742 million increase in operating expenses due to the inclusion of Progress Energy operating expenses beginning in July 2012, and
·A $345 million impairment charge under the 2013 Settlement agreement. This charge is primarily comprised of $295 million related to the agreement to forego recovery of a portion of the Crystal River Unit 3 regulatory asset, and a $65 million charge to write-off the wholesale portion of Levy investments. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Partially offsetting these increases was:
·A $28 million decrease in fuel expense (including purchased power and natural gas purchases for resale) primarily related to (i) lower volumes of coal used in electric generation primarily due to decreased generation resulting from less favorable weather conditions, (ii) lower purchased power costs in (a) the Carolinas, primarily due to additional generating capacity placed in-service late 2012, and (b) Ohio, primarily due to reduced sales volumes, partially offset by (iii) higher prices of natural gas used in electric generation, and (iv) higher volumes of natural gas used in electric generation, due primarily to additional generating capacity placed in service.
Interest Expense. The variance was primarily driven bythe inclusion of Progress Energy interest expense beginning in July 2012.
Income Tax Expense. The variance was primarily due to an increase in pretax income. The effective tax rate for the three months ended June 30, 2013 and 2012 was 37.6% and 35.1%, respectively. The increase in the effective tax rate was primarily due to an increase in pretax income and a reduction in allowance for funds used during construction (AFUDC) equity.
Segment Income. The variance resulted primarily from the inclusion of Progress Energy results beginning in July 2012 and higher net rate riders and retail pricing. These positive impacts were partially offset by the charge related to the 2013 Settlement agreement and less favorable weather.
Six Months Ended June 30, 2013 as Compared to June 30, 2012
Operating Revenues.The variance was driven primarily by:
·A $4,339 million increase in operating revenues due to the inclusion of Progress Energy operating revenues beginning in July 2012,
·A $95 million increase in fuel revenues (including emission allowances) driven primarily by increased demand from electric retail customers in 2013 compared to the same period in 2012 mainly due to favorable weather conditions, partially offset by lower fuel rates for electric retail customers in all jurisdictions, except Kentucky, and lower revenues for purchases of power in the Carolinas, Indiana, and Ohio. Fuel revenues represent sales to retail and wholesale customers,
109
PART I
·A $76 million net increase in rate riders primarily due to updates to the riders, and in retail pricing primarily due to revised retail rates resulting from the 2011 North Carolina and South Carolina rate cases implemented February 2012,
·A $58 million increase in electric and gas sales (net of fuel revenue) to retail customers due to favorable weather conditions in 2013 compared to 2012. For the first quarter ofCarolinas, Indiana and Ohio, weather statistics for heating degree days in 2013 were favorable compared to the same period in 2012. For the Carolinas, Indiana and Ohio, weather statistics for cooling degree days in 2013 were unfavorable compared to the same period in 2012, and revenues recognized for the energy efficiency programs; and
· A $71$34 million net increase in fuelwholesale power revenues, (including emission allowances) drivennet of sharing, primarily by higher fuel rates for electric retail customers in all regions and higher revenues in Ohio for purchases of power as a result of the new Ohio Electric Security Plan (ESP) which became effective January 1, 2012, partially offset by decreased demand from electric retail customers mainly due to less favorable weather conditions,a new customer, additional volumes and lower natural gas fuel rates in Ohio and Kentucky. Fuel revenues represent sales to retail and wholesale customers.
Partially offsetting these increases was:
·A $35 million decrease in electric sales (net of fuel) to retailcharges for capacity for customers due to overall less favorable weather conditions in 2012 compared to the same period in 2011. For the Carolinas, cooling degree days for the second quarter of 2012 were 5% above normal as compared to 31% above normal during the same period in 2011. For the Midwest, cooling degree days for the second quarter of 2012 were 37% above normal as compared to 17% above normal during the same period in 2011.served under long-term contracts.
Operating Expenses. The increasevariance was driven primarily by:
· A $61$3,393 million increase in operating expenses due to the inclusion of Progress Energy operating expenses beginning in July 2012,
·A $345 million impairment charge under the 2013 FPSC Settlement agreement. This charge is primarily comprised of $295 million related to the agreement to forego recovery of a portion of the Crystal River Unit 3 regulatory asset, and a $65 million charge to write-off the wholesale portion of Levy investments. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information,
·A $105 million increase in fuel expense (including purchased power and natural gas purchases for resale) primarily related to (i) higher purchasesvolumes of powercoal used in Ohio (as a result of the new Ohio ESP),electric generation primarily due to increased generation due to favorable weather conditions, (ii) higher volumes of natural gas used in electric generation due primarily to additional generating capacity placed in service, and (iii) higher coal prices higher purchased power costs in the Carolinasfor natural gas and Indiana, partially offset by lower volume of coal used in electric generation, resulting from less favorable weatherpartially offset by (iv) lower purchased power costs in (a) the Carolinas, primarily due to additional generating capacity placed in-service late 2012 and reflective of market conditions, (b) Indiana, reflective of market conditions, and lower coal-fired generation(c) Ohio, primarily due to low natural gas prices, and lower prices for natural gas used in electric generation;reduced sales volumes, and
· A $29$100 million increase in depreciation and amortization primarily due to increases in depreciation as a result of additional plant in service and amortization of regulatory assets.
Partially offsetting these increases was:
·A $37 million decrease in operating and maintenance expense primarily due to lower storm costs, partially offset by increased costs associated with the energy efficiency programs.
Income Tax Expense. The increase is primarily due to the increase in pretax income. The effective tax rate for the three months ended June 30, 2012 and 2011 was 35.1% and 32.6%, respectively. The change in the effective tax rate is primarily due to a reduction in prior year state deferred tax liabilities.
Segment Income. The increase resulted primarily from higher net retail pricing and rate riders, and a decrease in operating and maintenance expenses. These positive impacts were partially offset by higher income tax expense, less favorable weather, and increased depreciation and amortization.
Six Months Ended June 30, 2012 as Compared to June 30, 2011
Operating Revenues.The increase was driven primarily by:
·A $189 million net increase in retail rates and rate riders primarily due to revised retail rates resulting from the 2011 North Carolina and South Carolina rate cases implemented in the first quarter of 2012, and revenues recognized for the energy efficiency programs; and
·An $60 million increase in fuel revenues (including emission allowances) driven primarily by higher revenues in Ohio for purchases of power as a result of the new Ohio ESP, higher fuel rates for electric retail customers in all jurisdictions, and higher revenues for purchases of power in Indiana and the Carolinas, partially offset by decreased demand from electric retail customers in 2012 compared to the same period in 2011 mainly due to unfavorable weather conditions, and lower demand and fuel rates in Ohio and Kentucky from natural gas retail customers . Fuel revenues represent sales to retail and wholesale customers.
Partially offsetting these increases was:
·A $119 million decrease in electric and gas sales (net of fuel) to retail customers due to unfavorable weather conditions in 2012 compared to the same period in 2011. For the Carolinas, weather statistics for cooling degree days in 2012 were less favorable compared to the same period in 2011, while cooling degree days in the Midwest were favorable in 2012 compared to the same period in 2011. For the Carolinas and Midwest, weather statistics for heating degree days in 2012 were unfavorable compared to the same period in 2011.
Operating Expenses.The increase was driven primarily by:
79
PART I
·A $420 million increase due to 2012 impairment and other charges related to the Edwardsport integrated gasification combined cycle (IGCC) plant that is currently under construction. See Note 4 to the Unaudited Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information;
·A $50 million increase in depreciation and amortization primarily due to increases in depreciation as a result of additional plant in service and amortization of regulatory assets; and
·An $44 million increase in fuel expense (including purchased power and natural gas purchases for resale) primarily related to higher purchases of power in Ohio (as a result of the new Ohio ESP), higher volumes of natural gas used in electric generation, higher coal prices, higher purchased power costs in Indiana and the Carolinas, partially offset by lower volume of coal used in electric generation resulting from unfavorable weather conditions and lower coal-fired generation due to low natural gas prices, lower prices for natural gas used in electric generation, and lower gas volumes and prices to full-service retail gas customers.
Partially offsetting these increases was:
·A $142 million decrease in operating and maintenance expense primarily due to the establishment of regulatory assets in the first quarter of 2012, pursuant to regulatory orders, for future recovery of certain employee severance costs related to the 2010 voluntary severance plan and other costs,costs.
Partially offsetting these increases was:
·A $420 million decrease due to a prior year impairment and lower storm costs, partially offset by increased costs associated withother charges related to the energy efficiency programs.Edwardsport IGCC plant. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
Interest Expense. The increasevariance was primarily driven by higher debt balancesthe inclusion of Progress Energy interest expense beginning in July 2012.
Income tax expense. Tax Expense.The decrease isvariance was primarily due to the decreasean increase in pretax income. The effective tax rate for the six months ended June 30, 2013 and 2012 was 37.4% and 2011 was 34.9% and 33.9%, respectively. The changeincrease in the effective tax rate iswas primarily due to an increase in pretax income and a decreasereduction in AFUDC in 2012.equity.
Segment Income. The decreasevariance resulted primarily from the inclusion of Progress Energy results beginning in July 2012, the 2012 impairment and other charges related to the Edwardsport IGCCintegrated gasification combined cycle (IGCC) plant, unfavorablehigher net rate riders and retail pricing, favorable weather, and increased depreciation and amortization.the net increase in wholesale power revenues. These negativepositive impacts were partially offset by the charge related to the 2013 FPSC Settlement agreement, higher net retail pricingincome tax expense and rate riders, a decrease inhigher operating and maintenance expenses, and lower income tax expense.expenses.
Matters Impacting Future USFE&G Results
ResultsUSFE&G has settlement agreements related to rate cases in North Carolina and South Carolina before the North Carolina Utilities Commission (NCUC) and the Public Service Commission of South Carolina (PSCSC). USFE&G&G’s financial condition, results of operations and cash flows could be adversely impacted if these settlement agreements are impacteddenied or delayed by the completion of its major generation fleet modernization projects.NCUC or PSCSC. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for a discussion ofadditional information.
On April 12, 2013, the significant increaseNorth Carolina Supreme Court (NCSC) issued an order requiring the NCUC to make an independent determination regarding the proper return on equity included in the estimated cost of the 618 MW IGCC plant at Duke Energy Indiana’s Edwardsport Generating Station (Edwardsport IGCC). Additional updates to the cost estimate could occur through the completion of the plant in 2013. On April 30, 2012, Duke Energy Indiana entered into a settlement agreement with certain intervenors to cap the construction cost recoverable in retail rates which resulted in the recognition of a $420 million pre-tax charge to earnings in the first quarter ofCarolinas’ rate increase approved on January 27, 2012. The agreement is subject to approval byNCSC indicated the IURC, a final order is expected bydetermination should be based upon appropriate findings of fact that balance all the endavailable evidence, including the impact of 2012. Duke Energy Indiana is unable to predict the ultimate outcome of these proceedings. In the event the IURC disallows a portion of the remaining plant costs, including financing costs, or if cost estimates for the plant increase, additional charges to expense, which could be material, could occur.
See Item 1A, Risk Factors, for a discussion of significant uncertainties related to Progress Energy Florida’s Crystal River Unit 3. The decision related to repairing or retiring Crystal River Unit 3 is complex and subject to a number of unknown factors, including but not limited to, the cost of repair and the likelihood of obtaining NRC approval to restart the reactor after repair. In addition, the scope and estimated costs of necessary repairs of the delamination of Crystal River Unit 3 could prove more extensive than is currently identified, such repairs could prove not to be feasible resulting in the retirement of the unit, the costs of repair and/or replacement power could exceed estimates and insurance coverage or may not be recoverable through the regulatory process; the occurrence of any of which could adversely affectchanging economic conditions on customers. USFE&G’s financial condition, results of operations and cash flows.
Duke Energy Carolinas plans to file rate cases in North Carolina and South Carolina during 2012. Progress Energy Carolinas plans to file a rate case in North Carolina in 2012. Duke Energy Ohio filed electric and gas distribution rate cases in July 2012. These planned rates cases are needed to recover investments in Duke Energy’s ongoing infrastructure modernization projects and operating costs. USFE&G’s earningsflows could be adversely impacted if these rate cases are denied or delayed by anythe NCUC determines the return of equity should be adjusted. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
The FPSC is reviewing the prudence of the stateretirement decision, the mediated resolution of insurance claims with NEIL, and recovery of regulatory commissions.
assets related to Duke Energy anticipates recording chargesFlorida’s Crystal River Unit 3. A procedural schedule has been established providing for hearings in October 2013. On August 1 2013, Duke Energy Florida, the Florida Office of approximately $450 million to $550 million in the second half of 2012 associatedPublic Counsel and other customer advocates filed a Revised and Restated Stipulation and Settlement Agreement (2013 Settlement) with the merger with Progress Energy. This estimate includesFPSC. If approved, the costs2013 Settlement will replace and supplant the 2012 Settlement and substantially resolve additional issues, including (i) matters related to Crystal River Unit 3, (ii) Levy, (iii) Crystal River 1 and 2 coal units, and (iv) future generation needs in Florida. USFE&G’s financial condition, results of the Long-term FERC Mitigation plan, Interim FERC Mitigation, the retail rate reduction associated with Interim FERC Mitigation, employee severance, obligations to provide community supportoperations and merger transaction expenses. The majority of these costs will be recorded by USFE&G.
The ability to integrate Progress Energy businesses and realize cost savings and any other synergies expected from the merger with Progress Energycash flows could be different from what USFE&G expects and may have a significant impactadversely impacted if the FPSC issues an unfavorable ruling on USFE&G’s results of operations.the 2013 Settlement Agreement. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
COMMERCIAL POWER
Commercial Power |
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| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||||
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| Increase |
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| Increase | ||
(in millions, except where noted) | 2012 |
| 2011 |
| (Decrease) |
| 2012 |
| 2011 |
| (Decrease) | |||||||
Operating revenues | $ | 502 |
| $ | 595 |
| $ | (93) |
| $ | 1,082 |
| $ | 1,239 |
| $ | (157) | |
Operating expenses |
| 460 |
|
| 550 |
|
| (90) |
|
| 990 |
|
| 1,114 |
|
| (124) | |
Gains on sales of other assets and other, net |
| 1 |
|
| 11 |
|
| (10) |
|
| 1 |
|
| 13 |
|
| (12) | |
Operating income |
| 43 |
|
| 56 |
|
| (13) |
|
| 93 |
|
| 138 |
|
| (45) | |
Other income and expenses, net |
| 17 |
|
| 9 |
|
| 8 |
|
| 25 |
|
| 17 |
|
| 8 | |
Interest expense |
| 22 |
|
| 22 |
|
| ― |
|
| 41 |
|
| 46 |
|
| (5) | |
Income before income taxes |
| 38 |
|
| 43 |
|
| (5) |
|
| 77 |
|
| 109 |
|
| (32) | |
Income tax expense |
| 10 |
|
| 6 |
|
| 4 |
|
| 18 |
|
| 23 |
|
| (5) | |
Less: Income attributable to noncontrolling interests |
| ― |
|
| 7 |
|
| (7) |
|
| ― |
|
| 7 |
|
| (7) | |
Segment Income | $ | 28 |
| $ | 30 |
| $ | (2) |
| $ | 59 |
| $ | 79 |
| $ | (20) | |
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Actual coal-fired plant production, GWh |
| 3,299 |
|
| 3,716 |
|
| (417) |
|
| 7,367 |
|
| 8,407 |
|
| (1,040) | |
Actual gas-fired plant production, GWh |
| 4,513 |
|
| 2,512 |
|
| 2,001 |
|
| 9,096 |
|
| 5,221 |
|
| 3,875 | |
Actual renewable plant production, GWh |
| 786 |
|
| 844 |
|
| (58) |
|
| 1,784 |
|
| 1,741 |
|
| 43 | |
Net proportional MW capacity in operation |
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| 7,757 |
|
| 8,273 |
|
| (516) |
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|
| Three Months Ended June 30, |
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance |
| 2013 |
| 2012 |
| Variance | ||||||||||||||||||||||||||
Operating Revenues | $ | 557 |
| $ | 502 |
| $ | 55 |
| $ | 1,009 |
| $ | 1,082 |
| $ | (73) | ||||||||||||||||||||
Operating Expenses |
| 508 |
|
| 460 |
|
| 48 |
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| 1,041 |
|
| 990 |
|
| 51 | ||||||||||||||||||||
Gains on Sales of Other Assets and Other, net |
| 1 |
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| 1 |
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| - |
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| 1 |
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| 1 |
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| - | ||||||||||||||||||||
Operating (Loss) Income |
| 50 |
|
| 43 |
|
| 7 |
|
| (31) |
|
| 93 |
|
| (124) | ||||||||||||||||||||
Other Income and Expense, net |
| - |
|
| 17 |
|
| (17) |
|
| 11 |
|
| 25 |
|
| (14) | ||||||||||||||||||||
Interest Expense |
| 17 |
|
| 22 |
|
| (5) |
|
| 32 |
|
| 41 |
|
| (9) | ||||||||||||||||||||
Income (Loss) Before Income Taxes |
| 33 |
|
| 38 |
|
| (5) |
|
| (52) |
|
| 77 |
|
| (129) | ||||||||||||||||||||
Income Tax (Benefit) Expense |
| (8) |
|
| 10 |
|
| (18) |
|
| (51) |
|
| 18 |
|
| (69) | ||||||||||||||||||||
Segment Income (Loss) | $ | 41 |
| $ | 28 |
| $ | 13 |
| $ | (1) |
| $ | 59 |
| $ | (60) | ||||||||||||||||||||
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Coal-fired plant production, GWh |
| 4,185 |
|
| 3,299 |
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| 886 |
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| 8,734 |
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| 7,367 |
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| 1,367 | ||||||||||||||||||||
Gas-fired plant production, GWh |
| 3,341 |
|
| 4,513 |
|
| (1,172) |
|
| 7,238 |
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| 9,096 |
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| (1,858) | ||||||||||||||||||||
Renewable plant production, GWh |
| 1,415 |
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| 786 |
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| 629 |
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| 2,820 |
|
| 1,784 |
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| 1,036 | ||||||||||||||||||||
Total Commercial Power production, GWh |
| 8,941 |
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| 8,598 |
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| 343 |
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| 18,792 |
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| 18,247 |
|
| 545 | ||||||||||||||||||||
Net proportional MW capacity in operation |
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| 8,127 |
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| 7,757 |
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| 370 | ||||||||||||||||||||
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80110
PART I
Three Months Ended June 30, 20122013 as Compared to June 30, 20112012
Operating Revenues.The decreasevariance was driven primarily by:
· A $59An $85 million decreaseincrease in electricnet mark-to-market revenues from the coal-fired generation assets driven primarily by the expirationon non-qualifying power and capacity hedge contracts, consisting of the 2009-2011 ESP which dedicated Commercial Power’s coal-fired generationmark-to-market gains of $79 million in 2013 compared to Duke Energy Ohio’s retail customers, netlosses of stability charge revenues, partially offset by the coal-fired generation assets participating$6 million in the PJM Interconnection, LLC (PJM) wholesale energy market in 2012;2012,
· A $35$22 million decreaseincrease in electric revenues from Duke Energy Retail Sales, LLC (Duke Energy Retail) resulting from lower volumes and unfavorable pricing;higher production in the renewables portfolio, and
· A $12 million decrease in electric revenues from the gas-fired generation assets driven primarily by lower power prices partially offset by increased volumes.
Partially offsetting these decreases were:
·A $17 million increase from participation in competitive retail load auctions.
Operating Expenses.The decrease was driven primarily by:
·A $31 million decrease in operating expenses resulting primarily from lower 2012 transmission costs, lower expenses at the generating stations, and 2011 regulatory asset amortization expenses;
·A $25 million decrease in fuel expenses from the gas-fired generation assets driven by lower natural gas costs;
·A $15 million decrease due to the receipt of funds in 2012 related to a previously written off receivable associated with the Lehman Brothers bankruptcy;
·A $12 million decrease in fuel expenses from the coal-fired generation assets driven by lower production, partially offset by higher purchased power costs; and
·A $9 million decrease due to the impairment of the Vermillion station in the second quarter of 2011.
Gains on Sales of Other Assets and Other, net.The decrease in 2012 as compared to 2011 is attributable to 2011 gains on sales of certain assets resulting from a contract termination.
Other Income and Expenses, net.The increase in 2012 as compared to 2011 is primarily due to equity earnings on the renewables portfolio.
Net Income Attributable to Noncontrolling interest. The decrease in 2012 as compared to 2011 is primarily attributable to the prior year recognition of expense for a partner’s interest in the gain on a contract termination.
Segment Income. The decrease is primarily attributable to lower revenues driven by the expiration of the 2009-2011 ESP and the impact of competitive market dispatch for the Duke Energy Ohio coal-fired assets. These negative impacts were partially offset by 2012 PJM capacity revenues, and favorable earnings from the gas-fired generation assets.
Six Months Ended June 30, 2012 as Compared to June 30, 2011
Operating Revenues.The decrease was driven primarily by:
·A $131 million decrease in electric revenues from the coal-fired generation assets driven primarily by the expiration of the 2009-2011 ESP which dedicated Commercial Power’s coal-fired generation to Duke Energy Ohio’s retail customers, net of stability charge revenues, partially offset by the coal-fired generation assets participating in the PJM wholesale energy market in 2012;
·A $76 million decrease in electric revenues from Duke Energy Retail resulting from lower volumes and unfavorable pricing; and
·A $25 million decrease in electric revenues from DEGS, excluding renewables, due primarily to the termination of certain operations at the end of the first quarter of 2011 and a reduction of coal sales volumes as a result of lower natural gas prices.
Partially offsetting these decreases were:
·A $35 million increase from participation in competitive retail load auctions;
·A $28 million increase primarily due to PJM capacity revenues associated with the move of the coal-fired generation assets from MISO to PJM in 2012, net of a decrease related to lower average cleared capacity auction pricing in 2012 compared to 2011 for the gas-fired generation assets; and
·A $10$16 million increase in electric revenues from the gas-firedcoal-fired generation assets driven primarily by increased volumes, partially offset by lower power prices.
Partially offsetting these increases were:
·A $39 million decrease in PJM capacity revenues related to lower average cleared capacity auction pricing in 2013 compared to 2012, and
·A $26 million decrease in electric revenues from Duke Energy Generation Services, Inc. (DEGS), excluding renewables, due primarily to the sale of non-core business operations.
Operating Expenses.The decreasevariance was driven primarily by:
· A $46 million decrease in operating and maintenance expenses resulting primarily from higher prior year station outages, transmission costs, and regulatory asset amortization expenses;
·A $31 million decreaseincrease in fuel expenses from the gas-fired generation assets driven by lowerhigher natural gas costs, partially offset by lower natural gas volumes,
·A $15 million increase due to the prior year collection of a previously written off receivable associated with the Lehman Brothers bankruptcy,
·A $14 million increase in fuel expenses from the coal-fired generation assets driven by higher volumes;cost of coal, and
·A $10 million increase in net mark-to-market fuel expense on non-qualifying fuel hedge contracts, consisting of mark-to-market losses of $10 million in 2013 compared to no losses in 2012.
Partially offsetting these increases was:
·A $17 million decrease in DEGS, excluding renewables, operating expenses due primarily to the sale of non-core business operations.
Other Income and Expenses, net. The decrease in 2013 as compared to 2012 is primarily due to lower equity earnings on the renewables portfolio.
Income Tax (Benefit) Expense. The variance was primarily due to a decrease in pretax income and higher production tax credits in 2013 for the Renewables portfolio. The effective tax rate for the three months ended June 30, 2013 and 2012 was (23.3%) and 26.9%, respectively. The decrease in the effective tax rate for the period was primarily due to higher production tax credits that generated an overall tax benefit in 2013 compared to an overall tax expense in 2012.
Segment Income. The increase is primarily attributable to favorable net mark-to-market results on non-qualifying commodity hedge contracts and higher production tax credits in 2013 for the renewables portfolio. These positive impacts were partially offset by lower PJM capacity revenues and lower operating income from the gas-fired generation assets.
Six Months Ended June 30, 2013 as Compared to June 30, 2012
Operating Revenues. The variance was driven primarily by:
·A $100 million decrease in PJM capacity revenues related to lower average cleared capacity auction pricing in 2013 compared to 2012, and
·A $52 million decrease in electric revenues from DEGS, excluding renewables, due primarily to the sale of non-core business operations.
Partially offsetting these decreases were:
81111
PART I
· A $39 million increase in electric revenues from higher production in the renewables portfolio,
·A $21 million decreaseincrease in DEGS, excluding renewables,electric revenues from the gas-fired generation assets driven primarily by higher power prices, partially offset by decreased volumes, and
·A $14 million increase in net mark-to-market revenues on non-qualifying power and capacity hedge contracts, consisting of mark-to-market gains of $11 million in 2013 compared to losses of $3 million in 2012.
Operating Expenses. The variance was driven primarily by:
·A $49 million increase in fuel used due primarily toexpenses from the termination of certain operations at the end of the first quarter of 2011 and fromgas-fired generation assets driven by higher natural gas costs, partially offset by lower natural gas prices;volumes,
·A $16 million increase in net mark-to-market fuel expense on non-qualifying fuel hedge contracts, consisting of mark-to-market losses of $17 million in 2013 compared to losses of $1 million in 2012,
· A $15 million decreaseincrease due to the receiptprior year collection of funds in 2012 related to a previously written off receivable associated with the Lehman Brothers bankruptcy;bankruptcy,
·A $15 million increase in operating expense for the renewables portfolio, and
· An $11 million increase in depreciation expense driven primarily by additional renewable assets in operation.
Partially offsetting these increases were:
·A $12$31 million decrease in DEGS, excluding renewables, operating expenses due primarily to the sale of non-core business operations,
·A $16 million decrease in purchased power to serve competitive retail load auctions, and
·An $11 million decrease in purchased capacity and power to serve Duke Energy Retail customers.
Gains on Sales of Other Assets and Other, net.Income Tax (Benefit) Expense.The decrease in 2012 as compared to 2011 is attributable to 2011 gains on sales of certain assets resulting from a contract termination.
Other Income and Expenses, net.The increase in 2012 as compared to 2011 isvariance was primarily due to equity earnings ona decrease in pretax income and higher tax credits in 2013 for the renewablesRenewables portfolio.
Income Tax Expense. The decrease is primarily due to lower pretax income. The effective tax rate for the six months ended June 30, 2013 and 2012 was 97.6% and 2011 was 23.1% and 21.5%, respectively. The changeincrease in the effective tax rate isfor the period was primarily due to a pretax loss in 2013 compared to pretax income in 2012 and the decreaseimpact of higher tax credits in pretax income.2013.
Segment Income. Income.The decrease is primarily attributable to lower PJM capacity revenues driven byand lower operating income from the expiration of the 2009-2011 ESP and the impact of competitive market dispatch for the Duke Energy Ohio coal-firedgas-fired generation assets. These negative impacts were partially offset by higher PJM capacity revenues,income tax benefits and favorable earnings from the gas-fired generation assets.higher Duke Energy Retail operating income.
Matters Impacting Future Commercial Power Results
Commercial Power’s gas-fired non-regulated generation assets earn capacity revenues from PJM. PJM capacity prices are determined through an auction process for planning years from June through May of the following year and are conducted approximately three years in advance of the capacity delivery period. Capacity prices, for periods beginning June 2011 and continuing through May 2014 will be significantly lower than current and historical capacity prices. As a result, Commercial Power’s operating revenues and segment income will be negatively impacted through 2014.
Changes or variability in assumptions used in calculating the fair value of the renewables reporting unit for goodwill testing purposes including but not limited to, legislative actions related to tax credit extensions, and long-term growth rates and discount rates, could significantly impact the estimated fair value of the renewables reporting unit. In the event of a significant decline in the estimated fair value of the renewables reporting unit, goodwill and other asset impairment charges could be recorded. The carrying value of goodwill, and intangible assets associated with proposed renewable projects within Commercial Power’s renewables reporting unit was approximately $130$110 million at June 30, 2012.2013.
The current low energy price projections, as well as recently issued and proposed environmental regulations pertaining to coal and coal-fired generating facilities, and outcomes of pending regulatory proceedings could impact future cash flows and market valuations of Commercial Power’s coal-fired generation assets which could lead to impairment charges.
INTERNATIONAL ENERGY
International Energy |
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| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||||
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| Increase |
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| Increase | ||
(in millions, except where noted) |
| 2012 |
| 2011 |
| (Decrease) |
| 2012 |
| 2011 |
| (Decrease) | |||||||
Operating revenues |
| $ | 397 |
| $ | 406 |
| $ | (9) |
| $ | 799 |
| $ | 754 |
| $ | 45 | |
Operating expenses |
|
| 257 |
|
| 265 |
|
| (8) |
|
| 502 |
|
| 476 |
|
| 26 | |
Operating income |
|
| 140 |
|
| 141 |
|
| (1) |
|
| 297 |
|
| 278 |
|
| 19 | |
Other income and expenses, net |
|
| 36 |
|
| 55 |
|
| (19) |
|
| 90 |
|
| 114 |
|
| (24) | |
Interest expense |
|
| 21 |
|
| 11 |
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| 10 |
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| 37 |
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| 27 |
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| 10 | |
Income before income taxes |
|
| 155 |
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| 185 |
|
| (30) |
|
| 350 |
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| 365 |
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| (15) | |
Income tax expense |
|
| 46 |
| �� | 55 |
|
| (9) |
|
| 95 |
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| 103 |
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| (8) | |
Less: Income attributable to noncontrolling interest |
|
| 4 |
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| 3 |
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| 1 |
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| 8 |
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| 7 |
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| 1 | |
Segment Income |
| $ | 105 |
| $ | 127 |
| $ | (22) |
| $ | 247 |
| $ | 255 |
| $ | (8) | |
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Sales, GWh |
|
| 4,882 |
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| 4,516 |
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| 366 |
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| 9,956 |
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| 9,303 |
|
| 653 | |
Proportional MW capacity in operation |
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| 4,225 |
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| 4,190 |
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| 35 |
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| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance |
| 2013 |
| 2012 |
| Variance | ||||||||||||||||||||||||||
Operating Revenues | $ | 406 |
| $ | 397 |
| $ | 9 |
| $ | 798 |
| $ | 799 |
| $ | (1) | ||||||||||||||||||||
Operating Expenses |
| 270 |
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| 257 |
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| 13 |
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| 533 |
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| 502 |
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| 31 | ||||||||||||||||||||
Operating Income |
| 136 |
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| 140 |
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| (4) |
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| 265 |
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| 297 |
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| (32) | ||||||||||||||||||||
Other Income and Expense, net |
| 14 |
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| 36 |
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| (22) |
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| 47 |
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| 90 |
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| (43) | ||||||||||||||||||||
Interest Expense |
| 17 |
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| 21 |
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| (4) |
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| 38 |
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| 37 |
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| 1 | ||||||||||||||||||||
Income Before Income Taxes |
| 133 |
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| 155 |
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| (22) |
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| 274 |
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| 350 |
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| (76) | ||||||||||||||||||||
Income Tax Expense |
| 42 |
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| 46 |
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| (4) |
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| 84 |
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| 95 |
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| (11) | ||||||||||||||||||||
Less: Income Attributable to Noncontrolling Interests |
| 4 |
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| 4 |
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| - |
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| 6 |
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| 8 |
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| (2) | ||||||||||||||||||||
Segment Income | $ | 87 |
| $ | 105 |
| $ | (18) |
| $ | 184 |
| $ | 247 |
| $ | (63) | ||||||||||||||||||||
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Sales, GWh |
| 4,926 |
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| 4,882 |
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| 44 |
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| 9,682 |
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| 9,956 |
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| (274) | ||||||||||||||||||||
Net proportional MW capacity in operation |
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| - |
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| 4,584 |
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| 4,225 |
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| 359 | ||||||||||||||||||||
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Three Months Ended June 30, 20122013 as Compared to June 30, 20112012
Operating Revenues.The decreasevariance was driven primarily by:
·•A $26$19 million decreaseincrease in Central America due to lower average pricesChile as a result of a regulatory changeasset acquisition in El Salvador and unfavorable hydrology.
Partially offsetting these decreases was:
·A $10 million increase in Peru as a resultthe second half of higher average energy prices and volumes;
·A $6 million increase in Argentina as a result of higher volumes due to favorable hydrology; and
·A $3 million increase in Brazil due to higher average prices, offset by unfavorable exchange rates.
Operating Expenses.The decrease was driven primarily by:
·A $7 million decrease in Brazil primarily due to favorable exchange rates and reversal of bad debt provision, offset by higher variable costs.
Other Income and Expenses, net.The decrease was primarily driven by a remeasurement loss on dividends in Brazil, and a decrease in equity earnings from National Methanol Company (NMC) due to lower average prices and sales volumes of methyl tertiary butyl ether (MTBE).
Interest Expense.The decrease was primarily due to lower capitalized interest.2012.
82112
PART I
Partially offsetting this increase was:
• A $6 million decrease in Central America as a result of lower average prices, and
• A $4 million decrease in Argentina due to unfavorable hydrology and exchange rates, partially offset by higher average prices.
Operating Expenses. The variance was driven primarily by:
• A $14 million increase in Chile as a result of asset acquisition in the second half of 2012,
• A $5 million increase in Brazil primarily due to higher purchased power and prior year reversal of bad debt provision, partially offset by favorable exchange rates,
• A $4 million increase in Peru due to higher purchased power partially offset by lower fuel costs, and
• A $3 million increase in Ecuador as a result of higher fuel consumption.
Partially offsetting these increases was:
• A $15 million decrease in Central America due to lower purchased power and fuel costs.
Other Income Tax Expense.and Expense, net. The decrease iswas primarily driven by a net remeasurement loss in Peru due to strengthening of the decreaseU.S. dollar, and lower equity earnings at National Methanol Company (NMC) as a result of lower average methyl tertiary butyl ether (MTBE) prices and volumes resulting from planned maintenance in pretax income. The effective tax rate for the three months ended June 30, 2012 and 2011 was 29.5% and 29.4%, respectively.current year, partially offset by lower butane costs.
Segment Income. The decrease was primarily due to lower average prices and volumes in Central America, unfavorable exchange rates in Brazil, and lower equity earnings from NMC. These negative impacts werein NMC, a remeasurement loss on US denominated debt in Peru, and unfavorable hydrology in Argentina partially offset by higher average prices and volumesfavorable results in Peru and Brazil.Central America.
Six Months Ended June 30, 20122013 as Compared to June 30, 20112012
Operating Revenues.The increasevariance was driven primarily by:
·• A $26 million decrease in Brazil due to lower sales volumes and unfavorable exchange rates, partially offset by higher average prices, and
• An $8 million decrease in Argentina as a result of unfavorable hydrology and exchange rates, partially offset by higher average prices.
Partially offsetting these decreases were:
• A $24$26 million increase in Chile as a result of asset acquisition in the second half of 2012,
• A $4 million increase in Peru due to higher energy sales volumes partially offset by lower average prices, and
• A $3 million increase in Ecuador as a result of higher volumes.
Operating Expenses. The variance was driven primarily by:
• A $21 million increase in Chile due to asset acquisition in the second half of 2012,
• A $9 million increase in Peru due to higher purchased power and transmission costs, partially offset by lower fuel consumption,
• An $8 million increase in Brazil due to higher average prices and volumes,purchased power costs, partially offset by unfavorablefavorable exchange rates;rates, and
·• A $19$7 million increase in Peru due to higher average energy prices and favorable exchange rates; and
·An $8 million increase in ArgentinaEcuador as a result of higher volumes due to favorable hydrology, offset by unfavorable exchange rates.planned maintenance costs and fuel consumption.
Partially offsetting these increases was:
·• A $3$17 million decrease in EcuadorCentral America as a result of lower dispatch.fuel prices.
Operating Expenses.The increase was driven primarily by:
·A $29 million increase in Central America primarily due to higher purchased power and operating expenses on a project placed in service after second quarter 2011.
Other Income and Expenses,Expense, net.The decrease was primarily driven by a net remeasurement loss in Latin America due to strengthening of the absenceU.S. dollar, and lower equity earnings at NMC as a result of priorlower MTBE average prices and volumes resulting from planned maintenance in the current year, Peru arbitration award, partially offset by higher equity earnings in NMC due to higher average prices and sales volumes of MTBE.lower butane costs.
Interest Expense.Income Tax Expense. The decreasevariance was primarily due to lower capitalized interest.
Income Tax Expense. The decrease is primarily due to the decreasean increase in pretax income. The effective tax rate for the six months ended June 30, 2013 and 2012 was 30.6% and 2011 was 27.1% and 28.1%, respectively.
Segment Income. The decrease was primarily due to the absence of a prior year Peru arbitration award, lower average prices and volumesequity earnings in Central America,NMC, lower results in Brazil and unfavorable exchange rates in Brazil. These negative impacts were partially offset by higher average prices in Brazil and Peru, and higher equity earnings from NMC.rates.
OTHER
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| Three Months Ended June 30, |
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance |
| 2013 |
| 2012 |
| Variance | ||||||||||||||||||||||||||
Operating Revenues | $ | 36 |
| $ | 16 |
| $ | 20 |
| $ | 71 |
| $ | 31 |
| $ | 40 | ||||||||||||||||||||
Operating Expenses |
| 156 |
|
| 14 |
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| 142 |
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| 246 |
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| 30 |
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| 216 | ||||||||||||||||||||
Losses on Sales of Other Assets and Other, net |
| (4) |
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| - |
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| (4) |
|
| (4) |
|
| (1) |
|
| (3) | ||||||||||||||||||||
Operating (Loss) Income |
| (124) |
|
| 2 |
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| (126) |
|
| (179) |
|
| - |
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| (179) | ||||||||||||||||||||
Other Income and Expense, net |
| 8 |
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| (6) |
|
| 14 |
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| 19 |
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| (1) |
|
| 20 | ||||||||||||||||||||
Interest Expense |
| 105 |
|
| 46 |
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| 59 |
|
| 200 |
|
| 89 |
|
| 111 | ||||||||||||||||||||
Loss Before Income Taxes |
| (221) |
|
| (50) |
|
| (171) |
|
| (360) |
|
| (90) |
|
| (270) | ||||||||||||||||||||
Income Tax Benefit |
| (81) |
|
| (25) |
|
| (56) |
|
| (141) |
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| (49) |
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| (92) | ||||||||||||||||||||
Less: Loss Attributable to Noncontrolling Interests |
| (1) |
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| - |
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| (1) |
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| (3) |
|
| - |
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| (3) | ||||||||||||||||||||
Net Expense | $ | (139) |
| $ | (25) |
| $ | (114) |
| $ | (216) |
| $ | (41) |
| $ | (175) | ||||||||||||||||||||
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113
Other |
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| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||||
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| Increase |
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| Increase | ||
(in millions) | 2012 |
| 2011 |
| (Decrease) |
| 2012 |
| 2011 |
| (Decrease) | |||||||
Operating revenues | $ | 16 |
| $ | 9 |
| $ | 7 |
| $ | 31 |
| $ | 20 |
| $ | 11 | |
Operating expenses |
| 14 |
|
| 27 |
|
| (13) |
|
| 30 |
|
| 53 |
|
| (23) | |
Losses on sales of other assets and other, net |
| ― |
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| (8) |
|
| 8 |
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| (1) |
|
| ― |
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| (1) | |
Operating income (loss) |
| 2 |
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| (26) |
|
| 28 |
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| ― |
|
| (33) |
|
| 33 | |
Other income and expenses, net |
| (6) |
|
| 26 |
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| (32) |
|
| (1) |
|
| 48 |
|
| (49) | |
Interest expense |
| 46 |
|
| 36 |
|
| 10 |
|
| 89 |
|
| 75 |
|
| 14 | |
(Loss) income before income taxes |
| (50) |
|
| (36) |
|
| (14) |
|
| (90) |
|
| (60) |
|
| (30) | |
Income tax benefit |
| (25) |
|
| (13) |
|
| (12) |
|
| (49) |
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| (28) |
|
| (21) | |
Less: (Loss) income attributable to noncontrolling interest |
| ― |
|
| (4) |
|
| 4 |
|
| ― |
|
| (6) |
|
| 6 | |
Net Expense | $ | (25) |
| $ | (19) |
| $ | (6) |
| $ | (41) |
| $ | (26) |
| $ | (15) |
PART I
Three Months Ended June 30, 20122013 as Compared to June 30, 20112012
Operating Revenues.revenues. The increasevariance was driven primarily by mark-to-market activity of mitigation sales related to the Progress Energy merger and higher premiums earned at Bison Insurance Company Limited (Bison) as a result of the addition of Progress Energy. These positive impacts were partially offset by mark-to-market activity at Duke Energy Trading and Marketing, LLC (DETM).
Operating Expenses.expenses. The decreasevariance was driven primarily by favorable loss experiencecharges related to the Progress Energy merger including mitigation sales and system integration costs, a litigation reserve in 2013, increased severance charges, and increased reinsurance expenses at Bison and higher prior year donations.due to the addition of Progress Energy.
Other Incomeincome and Expenses, netexpense. , net.The decreasevariance was driven primarily by lowerhigher returns on investments that support benefit obligations in 20122013 compared to 2011, a reversal of reserves related to certain guarantees Duke Energy had issued on behalf of Crescent in the prior year, higher interest income recorded in 2011 following the resolution of certain income tax matters related to prior years, and prior year net gains on sales of investments.2012.
Interest Expense.expense. The increasevariance was due primarily to higher debt balances as a result of the inclusion of Progress Energy interest expense beginning in the current year.July 2012 and additional debt issuances.
Income Tax Benefit.tax benefit. The increase isvariance was primarily due to the decreasean increase in pretax income.loss. The effective tax rate for the three months ended June 30, 2013 and 2012 was 37.0% and 2011 was 50.0% and 34.8%, respectively.
Net Expense.expense. The increasevariance was due primarily to charges related to the Progress Energy merger including mitigation sales and system integration costs, higher interest expense, due to newa litigation reserve in 2013, increased severance charges, and additional debt issuances, lower returns on investments that support benefit obligations, a reversal of reserves related to certain guarantees.issuances. These negative impacts were partially offset by higher income tax benefit due to increased net expense.
Six Months Ended June 30, 20122013 as Compared to June 30, 20112012
Operating Revenues.revenues. The increasevariance was driven primarily by mark-to-market activity of mitigation sales related to the Progress Energy merger and higher premiums earned at Bison as a result of the addition of Progress Energy. These positive impacts were partially offset by mark-to-market activity at DETM.
Operating Expenses.expenses. The decreasevariance was driven primarily by favorable loss experience at Bison, prior year donations, and lower costscharges related to the Progress Energy merger withincluding mitigation sales and system integration costs, a litigation reserve in 2013, increased severance charges and unfavorable loss experience, and increased reinsurance expenses due to the addition of Progress Energy.Energy at Bison.
83
PART I
Other Incomeincome and Expenses, netexpense. , net.The decreasevariance was driven primarily by lowerhigher returns on investments that support benefit obligations in 20122013 compared to 2011, higher interest income recorded in 2011 following the resolution of certain income tax matters related to prior years, a reversal of reserves related to certain guarantees Duke Energy had issued on behalf of Crescent in the prior year,2012 and current year impairments and prior year net gains on sales of investments.investments in the prior year.
Interest Expense.expense. The increasevariance was due primarily to higher debt balances as a result of the inclusion of Progress Energy interest expense beginning in the current year.July 2012 and additional debt issuances.
Income Tax Benefit.tax benefit. The increase isvariance was primarily due to the decreasean increase in pretax income.loss. The effective tax rate for the six months ended June 30, 2013 and 2012 was 39.1% and 2011 was 54.4% and 46.5%, respectively.
Net Expense.expense. The increasevariance was due primarily to charges related to the Progress Energy merger including mitigation sales and system integration costs, higher interest expense, due to newa litigation reserve in 2013, increased severance charges, and additional debt issuances, favorable tax resolutions in the prior year, unfavorable returns on investments that support benefit obligations, a reversal of reserves related to certain guarantees and current year impairments.issuances. These negative impacts were partially offset by higher income tax benefit due to increased net expense mark-to-market activity at DETM and favorable loss experience at Bison.higher returns on investments that support benefit obligations in 2013 compared to 2012.
Matters Impacting Future Other Results
Duke Energy previously held an effective 50%50 percent interest in Crescent Resources LLC (Crescent), which was a real estate joint venture formed by Duke Energy in 2006 that filed for Chapter 11 bankruptcy protection in June 2009. On June 9, 2010, Crescent restructured and emerged from bankruptcy and Duke Energy forfeited its entire 50%50 percent ownership interest to Crescent debt holders. This forfeiture caused Duke Energy to recognize a loss, for tax purposes, on its interest in the second quarter of 2010. Although Crescent has reorganized and emerged from bankruptcy with creditors owning all Crescent interest, there remains uncertainty as to the tax treatment associated with the restructuring. Based on this uncertainty, it is possible that Duke Energy could incur a future tax liability related to the tax losses associated with its partnership interest in Crescent and the resolution of issues associated with Crescent’s emergence from bankruptcy.
114
PART I
DUKE ENERGY CAROLINAS
INTRODUCTION
Management’s Discussion and Analysis should be read in conjunction with Duke Energy Carolinas’s Unauditedthe accompanying Condensed Consolidated Financial Statements.
Duke Energy Carolinas is an indirect wholly owned subsidiary of Duke Energy. Duke Energy Carolinas is an electric utility company that generates, transmits, distributesStatements and sells electricity in North CarolinaNotes for the six months ended June 30, 2013 and South Carolina.
BASIS OF PRESENTATION2012.
The results of operations and variance discussion for Duke Energy Carolinas is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
RESULTS OF OPERATIONS
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| Six Months Ended June 30, | |||||||
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| Increase | |
(in millions) | 2012 |
| 2011 |
| (Decrease) | |||||
Operating revenues | $ | 3,117 |
| $ | 3,159 |
| $ | (42) | ||
Operating expenses |
| 2,262 |
|
| 2,466 |
|
| (204) | ||
Gains on sales of other assets and other, net |
| 6 |
|
| 1 |
|
| 5 | ||
Operating income |
| 861 |
|
| 694 |
|
| 167 | ||
Other income and expenses, net |
| 82 |
|
| 92 |
|
| (10) | ||
Interest expense |
| 190 |
|
| 171 |
|
| 19 | ||
Income before income taxes |
| 753 |
|
| 615 |
|
| 138 | ||
Income tax expense |
| 276 |
|
| 217 |
|
| 59 | ||
Net Income | $ | 477 |
| $ | 398 |
| $ | 79 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| Six Months Ended June 30, | |||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance | ||||||||||||||||||||
Operating Revenues | $ | 3,320 |
| $ | 3,117 |
| $ | 203 | |||||||||||||||||
Operating Expenses |
| 2,537 |
|
| 2,262 |
|
| 275 | |||||||||||||||||
Gains on Sales of Other Assets and Other, net |
| 2 |
|
| 6 |
|
| (4) | |||||||||||||||||
Operating Income |
| 785 |
|
| 861 |
|
| (76) | |||||||||||||||||
Other Income and Expenses, net |
| 65 |
|
| 82 |
|
| (17) | |||||||||||||||||
Interest Expense |
| 173 |
|
| 190 |
|
| (17) | |||||||||||||||||
Income Before Income Taxes |
| 677 |
|
| 753 |
|
| (76) | |||||||||||||||||
Income Tax Expense |
| 252 |
|
| 276 |
|
| (24) | |||||||||||||||||
Net Income | $ | 425 |
| $ | 477 |
| $ | (52) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
The following table presents the percentage change in GWh sales and average number of customers for Duke Energy Carolinas. Except as otherwise noted, the below percentages represent billed sales only for the periods presented and are not weather normalized. | |||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Increase (decrease) over prior year | 2013 |
| |||||||||||||||||||||||
Residential sales(a) | 7.7 | % | |||||||||||||||||||||||
General service sales(a) | 1.2 | % | |||||||||||||||||||||||
Industrial sales(a) | (1.3) | % | |||||||||||||||||||||||
Wholesale power sales | 113.1 | % | |||||||||||||||||||||||
Total sales(b) | 8.7 | % | |||||||||||||||||||||||
Average number of customers | 0.6 | % | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
(a) | Major components of retail sales. | ||||||||||||||||||||||||
(b) | Consists of all components of sales, including all billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. | ||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
The increase in Duke Energy Carolinas’ net income for the six months endedSix Months Ended June 30, 2012 compared2013 as Compared to June 30, 2011 was primarily due to the following factors:2012
Operating Revenues. The decreasevariance was primarily due to:
· A $156$127 million decreaseincrease in fuel revenues driven primarily by decreasedan increased demand from retail customers mainly due to unfavorablefavorable weather conditions, partially offset by highera decrease in fuel rates in both North Carolina and South Carolina. Fuel revenues represent sales to retail and wholesale customers;customers,
·A $33 million (net of fuel revenue) increase in GWh sales to retail customers due to favorable weather conditions. The weather statistics for heating degree days in the first half of 2013 were favorable compared to the same period in 2012, with the number of heating degree days for 2013 being 7% above normal as compared to 25% below normal in 2012. The positive impact of higher heating degree days was partially offset by somewhat lower cooling degree days in the 2013 period than 2012, and
· A $99 million (net of fuel) decrease in sales to retail customers due to unfavorable weather conditions. The number of heating degree days for the first half of 2012 was 25% below normal as compared to essentially flat to normal in 2011. In addition, cooling degree days for 2012 were 11% above normal compared to 32% above normal in 2011.
Partially offsetting these decreases were:
·A $193$26 million increase in wholesale power revenues, net retail pricing and rate ridersof sharing, primarily due to revised retail base rates implementeda new customer in North Carolina2013, increased capacity charges, and South Carolina in the first quarter of 2012, and revenues recognizedadditional volumes for the energy efficiency programs; andcustomers served under long-term contracts.
Operating Expenses. The variance was primarily due to:
· A $14$139 million increase in weather adjusted sales volumes to customers primarily due to an extra day of revenues for leap year 2012.
84
PART I
Operating Expenses. The decrease was primarily due to:
·A $158 million decrease in fuel expense (including purchased power) primarily related to lower volumehigher volumes of coal and natural gas from increased generation due to favorable weather conditions and increased prices of natural gas used in electric generation, partially offset by decreased purchased power due to lower demand based on unfavorable weather conditionsadditional generating capacity placed in service late 2012 and lowerincreased coal-fired generation due to lowhigher natural gas prices;prices, and
· A $122$129 million decreaseincrease in operating and maintenance expenses primarily due to the establishment of regulatory assets in the first quarter of 2012, pursuant to regulatory orders for future recovery of certain employee severance costs related to the 2010 voluntary severance plan and other costs, coupledDuke Energy Carolinas’ portion of the costs associated with decreasedthe Progress Energy merger, higher non-outage costs at generation plants, and increased storm costs, partially offset by lower customer service and energy efficiency program costs, lower corporate and employee benefit costs, and prior year required donations resulting from the most recent North Carolina and South Carolina rate cases.
Partially offsetting these decreases were:
·A $63 million increase in depreciation and amortization primarily due to increases in depreciation as a result of additional plant in service and amortization of certain regulatory assets; and
·A $13 million increase in general taxes primarily due to a favorable prior year resolution of a property tax issue related to pollution control equipment exemptions, higher revenue related taxes in 2012 and a sales and use tax refund in 2011.
Other Income and Expenses,Expense, net.The decrease is primarily due to a lower equity component of AFUDC, due primarily to certain major projects that were placed into service in late 2012, partially offset by higher deferred returns.
115
PART I
Interest Expense. The decrease is primarily due to higher deferred interest on the costs of major projects recently placed in service but not yet reflected in customer rates, partially offset by a lower debt component of AFUDC.
Interest Expense. The increase is primarily due to lower debt return on deferred projects, lower debt component of AFUDC, and higher interest expense on long-term debt and certain income tax matters.
Income Tax Expense. The increase in income tax expense isvariance was primarily due to an increasea decrease in pretax income. The effective tax rate for the six months ended June 30, 2013 and 2012 was 37.2% and 2011, was 36.7% and 35.3%, respectively. The increase in the effective tax rate is primarily due to the increase in pretax income and a decrease in AFUDC in 2012.
Matters Impacting Future Duke Energy Carolinas Results
Duke Energy Carolinas planshas settlement agreements related to file rate cases in North Carolina and South Carolina during 2012. These planned rates cases are needed to recover investments in Duke Energy Carolinas’ ongoing infrastructure modernization projectsbefore the NCUC and operating costs.PSCSC. Duke Energy Carolinas’ earnings could be adversely impacted if these rate casesthe settlement agreements are denied or delayed by either of the state regulatory commissions.NCUC or the PSCSC. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Duke Energy anticipates recording charges of approximately $450 millionOn April 12, 2013, the NCSC issued an order requiring the NCUC to $550 millionmake an independent determination regarding the proper return on equity included in the second half of 2012 associated with the merger with Progress Energy. This estimate includes the costs of the Long-term FERC Mitigation plan, Interim FERC Mitigation, the retail rate reduction associated with Interim FERC Mitigation, employee severance, obligations to provide community support and merger transaction expenses. A significant portion of these costs will be recorded by Duke Energy Carolinas.
The ability to integrate Progress Energy businesses and realize cost savings and any other synergies expected from the merger with Progress Energy could be different from what Duke Energy Carolinas expects and may have a significant impact on Duke Energy Carolinas’ rate increase approved on January 27, 2012. The NCSC indicated the determination should be based upon appropriate findings of fact that balance all the available evidence, including the impact of changing economic conditions on customers. Duke Energy Carolinas’ financial condition, results of operations.operations and cash flows could be adversely impacted if the NCUC determines the return of equity should be adjusted. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
116
PART I
DUKEPROGRESS ENERGY OHIO
INTRODUCTION
Management’s Discussion and Analysis should be read in conjunction with Duke Energy Ohio’s Unauditedthe accompanying Condensed Consolidated Financial Statements.Statements and Notes for the six months ended June 30, 2013 and 2012.
The results of operations and variance discussion for Progress Energy is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Six Months Ended June 30, | |||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance | ||||||||||||||
Operating Revenues | $ | 4,467 |
| $ | 4,390 |
| $ | 77 | |||||||||||
Operating Expenses |
| 3,924 |
|
| 3,752 |
|
| 172 | |||||||||||
Gains on Sales of Other Assets and Other, net |
| 1 |
|
| 2 |
|
| (1) | |||||||||||
Operating Income |
| 544 |
|
| 640 |
|
| (96) | |||||||||||
Other Income and Expenses, net |
| 37 |
|
| 65 |
|
| (28) | |||||||||||
Interest Expense |
| 358 |
|
| 378 |
|
| (20) | |||||||||||
Income From Continuing Operations Before Taxes |
| 223 |
|
| 327 |
|
| (104) | |||||||||||
Income Tax Expense From Continuing Operations |
| 82 |
|
| 118 |
|
| (36) | |||||||||||
Income From Continuing Operations |
| 141 |
|
| 209 |
|
| (68) | |||||||||||
(Loss) Income From Discontinued Operations, net of tax |
| (4) |
|
| 7 |
|
| (11) | |||||||||||
Net Income |
| 137 |
|
| 216 |
|
| (79) | |||||||||||
Less: Net Income Attributable to Noncontrolling Interest |
| 1 |
|
| 3 |
|
| (2) | |||||||||||
Net Income Attributable to Parent | $ | 136 |
| $ | 213 |
| $ | (77) | |||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||
Six Months Ended June 30, 2013 as Compared to June 30, 2012
Operating Revenues. The variance was primarily due to:
·A $95 million increase in sales at Duke Energy Ohio isProgress (excluding fuel revenues) to wholesale customers primarily due to a new contract with a major wholesale customer that began in January 2013, an indirect wholly owned subsidiary of Duke Energy.amended capacity contract with a major wholesale customer that began in May 2012 and favorable weather conditions,
·An $81 million increase in base revenues at Duke Energy Ohio’s principal linesFlorida primarily due to a retail base rate increase effective January 1, 2013,
·A $41 million increase in capacity clause revenues at Duke Energy Florida primarily due to an increase in recovery rates related to the proposed Levy Nuclear Station (Levy) effective January 1, 2013,
·A $36 million increase (net of business include generation, transmissionfuel revenue) in GWh sales to retail customers due to favorable weather conditions, and distribution
·A $20 million increase in wholesale fuel revenue at Duke Energy Progress due to higher sales primarily due to favorable weather conditions.
Partially offsetting these increases was:
·An $186 million decrease in fuel revenues at Duke Energy Florida primarily due to the impact of electricity, the sale of and/or transportation of natural gas,lower residential fuel rates and energy marketinga decrease in parts of Ohio, Illinois and Pennsylvania.GWh retail sales due to weather.
BASISOperating Expenses. The variance was primarily due to:
·A $345 million impairment charge at Duke Energy Florida under the 2013 Settlement agreement. This charge is primarily comprised of $295 million related to the agreement to forego recovery of a portion of the Crystal River Unit 3 regulatory asset, and a $65 million charge to write-off the wholesale portion of Levy investments. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information,
·A $43 million increase in fuel expense at Duke Energy Progress (including purchased power) primarily from demand associated with favorable weather, partially offset by lower fuel expense due to generation mix as a result of retiring certain coal-fired plants and adding one new natural gas-fired generating plant,
·A $23 million increase in depreciation and amortization at Duke Energy Florida primarily due to higher nuclear cost-recovery amortization related to Levy, and
·A $22 million current year impairment charge at Duke Energy Progress resulting primarily from the decision to suspend the application for two proposed nuclear units as the Shearon Harris Nuclear Station (Harris).
Partially offsetting these increases were:
·A $167 million decrease in fuel expense at Duke Energy Florida due to the application of NEIL settlement proceeds as well as lower system requirements,
117
PART I
·A $70 million decrease in operation and maintenance expenses at Duke Energy Progress primarily due to one nuclear refueling outage in 2013 compared to three extended outages during the same period in 2012, partially offset by higher costs to achieve the merger with Duke Energy and an agreement to make contributions for low-income customers and job training in accordance with the 2013 NCUC rate case order. The lower nuclear plant outage costs include the impact of implementation of levelizing nuclear plant outage costs in accordance with the 2013 NCUC rate case order, retroactive to January 1, 2013, which resulted in the deferral of certain incremental operation and maintenance costs associated with the 2013 refueling outage,
·A $18 million decrease in depreciation and amortization expenses at Duke Energy Progress primarily due to a reversal of a portion of cost of removal reserves in accordance with the 2013 NCUC rate case order, and
·A $15 million decrease in previously recognized impairment charges at Duke Energy Florida primarily due to the application of NEIL settlement proceeds.
Other Income and Expenses, net. The variance was primarily due to the $10 million prior-year pretax unrealized gain to record the change in fair value of the contingent value obligations (CVOs) compared to no change in the fair value of the CVOs in 2013.
Interest Expense. The variance was primarily due to the $37 million capitalized interest, starting January 1, 2013, on the regulatory asset related to the retail portion of the retired Crystal River Unit 3 assets, partially offset by the $29 million charge to interest expense on the redemption of Progress Energy’s 7.10% Cumulative Quarterly Income Preferred Securities (QUIPS) in January 2013.
Income Tax Expense from Continuing Operations. The variance was primarily due to a decrease in pretax income. The effective tax rates for the six months ended June 30, 2013 and 2012 were 36.7% and 36.1%, respectively. The increase in the effective tax rate was primarily due to the impact of lower AFUDC equity and the ESOP dividend deduction being recorded at Duke Energy in 2013.
Matters Impacting Future Progress Energy Results
The FPSC is reviewing the prudence of the retirement decision, the mediated resolution of insurance claims with NEIL, and recovery of regulatory assets related to Duke Energy Florida’s Crystal River Unit 3. A procedural schedule has been established providing for hearings in October 2013. On August 1 2013, Duke Energy Florida, the Florida Office of Public Counsel and other customer advocates filed a Revised and Restated Stipulation and Settlement Agreement (2013 Settlement) with the FPSC. If approved, the 2013 Settlement will replace and supplant the 2012 Settlement and substantially resolve additional issues, including (i) matters related to Crystal River Unit 3, (ii) Levy, (iii) Crystal River 1 and 2 coal units, and (iv) future generation needs in Florida. Progress Energy’s financial condition, results of operations and cash flows could be adversely impacted if the FPSC issues an unfavorable ruling on the 2013 Settlement Agreement. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
118
PART I
DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 2013 and 2012.
The results of operations and variance discussion for Duke Energy Progress is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
RESULTS OF PRESENTATIONOPERATIONS
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| Six Months Ended June 30, | |||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance | ||||||||||||||||||||
Operating Revenues | $ | 2,351 |
| $ | 2,180 |
| $ | 171 | |||||||||||||||||
Operating Expenses |
| 1,973 |
|
| 1,991 |
|
| (18) | |||||||||||||||||
Gains on Sales of Other Assets and Other, net |
| - |
|
| 1 |
|
| (1) | |||||||||||||||||
Operating Income |
| 378 |
|
| 190 |
|
| 188 | |||||||||||||||||
Other Income and Expenses, net |
| 22 |
|
| 36 |
|
| (14) | |||||||||||||||||
Interest Expense |
| 95 |
|
| 104 |
|
| (9) | |||||||||||||||||
Income Before Income Taxes |
| 305 |
|
| 122 |
|
| 183 | |||||||||||||||||
Income Tax Expense |
| 118 |
|
| 39 |
|
| 79 | |||||||||||||||||
Net Income |
| 187 |
|
| 83 |
|
| 104 | |||||||||||||||||
Less: Preferred Stock Dividend Requirement |
| - |
|
| 1 |
|
| (1) | |||||||||||||||||
Net Income Available to Parent | $ | 187 |
| $ | 82 |
| $ | 105 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
The following table presents the percentage change in GWh sales and average number of customers for Duke Energy Progress. Except as otherwise noted, the below percentages represent billed sales only for the periods presented and are not weather normalized. | |||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Increase over prior period | 2013 |
| |||||||||||||||||||||||
Residential sales(a) | 9.9 | % | |||||||||||||||||||||||
General service sales(a) | 0.1 | % | |||||||||||||||||||||||
Industrial sales(a) | (0.1) | % | |||||||||||||||||||||||
Wholesale power sales | 22.5 | % | |||||||||||||||||||||||
Total sales(b) | 8.0 | % | |||||||||||||||||||||||
Average number of customers | 0.8 | % | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
(a) | Major components of retail sales. | ||||||||||||||||||||||||
(b) | Consists of all components of sales, including all billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. | ||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Six Months Ended June 30, 2013 as Compared to June 30, 2012
Operating Revenues. The variance was primarily due to:
·A $95 million increase in sales (excluding fuel revenues) to wholesale customers primarily due to a new contract with a major wholesale customer that began in January 2013, an amended capacity contract with a major wholesale customer that began in May 2012 and favorable weather conditions,
·A $47 million increase (net of fuel revenue) in GWh sales to retail customers due to favorable weather conditions. The number of heating degree days for first half of 2013 was 7 percent above normal compared to 28 percent below normal for the same period in 2012. This was partially offset by cooling degree days for the first half of 2013 being 16 percent below normal compared to 7 percent above normal for the same period in 2012, and
·A $20 million increase in wholesale fuel revenue due to higher sales primarily due to favorable weather conditions.
Operating Expenses. The variance was primarily due to:
·A $70 million decrease in operation and maintenance expenses primarily due to one nuclear refueling outage in 2013 compared to three extended outages during the same period in 2012, partially offset by higher costs to achieve the merger with Duke Energy and an agreement to make contributions for low-income customers and job training in accordance with the 2013 NCUC rate case order. The lower nuclear plant outage costs include the impact of implementation of levelizing nuclear plant outage costs in accordance with the NCUC rate case order, retroactive to January 1, 2013, which resulted in the deferral of incremental operation and maintenance costs associated with the 2013 refueling outage, and
·An $18 million decrease in depreciation and amortization expenses primarily due to a reversal of a portion of cost of removal reserves in accordance with the 2013 NCUC rate case order.
Partially offsetting these decreases were:
·A $43 million increase in fuel expense (including purchased power) primarily from demand associated with favorable weather, partially offset by lower fuel expense due to generation mix as a result of retiring certain coal-fired plants and adding one new natural gas-fired generating plant, and
119
PART I
·A $22 million current year impairment charge resulting from the decision to suspend the application for two proposed nuclear units as the Harris nuclear station.
Income Tax Expense. The variance was primarily due to an increase in pretax income. The effective tax rate for the six months ended June 30, 2013 and 2012 was 38.7% and 31.4%, respectively. The increase in the effective tax rate was primarily due to the favorable prior year tax benefit related to the manufacturing deduction and the impact of lower AFUDC equity in 2013.
120
PART I
DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 2013 and 2012.
The results of operations and variance discussion for Duke Energy Florida is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| Six Months Ended June 30, | |||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance | ||||||||||||||||||||
Operating Revenues | $ | 2,110 |
| $ | 2,206 |
| $ | (96) | |||||||||||||||||
Operating Expenses |
| 1,943 |
|
| 1,756 |
|
| 187 | |||||||||||||||||
Gains on Sales of Other Assets and Other, net |
| 1 |
|
| 1 |
|
| - | |||||||||||||||||
Operating Income |
| 168 |
|
| 451 |
|
| (283) | |||||||||||||||||
Other Income and Expenses, net |
| 13 |
|
| 18 |
|
| (5) | |||||||||||||||||
Interest Expense |
| 92 |
|
| 132 |
|
| (40) | |||||||||||||||||
Income Before Income Taxes |
| 89 |
|
| 337 |
|
| (248) | |||||||||||||||||
Income Tax Expense |
| 36 |
|
| 126 |
|
| (90) | |||||||||||||||||
Net Income |
| 53 |
|
| 211 |
|
| (158) | |||||||||||||||||
Less: Preferred Stock Dividend Requirement |
| - |
|
| 1 |
|
| (1) | |||||||||||||||||
Net Income Available to Parent | $ | 53 |
| $ | 210 |
| $ | (157) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
The following table presents the percentage change in GWh sales and average number of customers for Duke Energy Florida. Except as otherwise noted, the below percentages represent billed sales only for the periods presented and are not weather normalized. | |||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Increase (decrease) over prior period | 2013 |
| |||||||||||||||||||||||
Residential sales(a) | 0.1 | % | |||||||||||||||||||||||
General service sales(a) | (2.3) | % | |||||||||||||||||||||||
Industrial sales(a) | 1.1 | % | |||||||||||||||||||||||
Wholesale power sales | (14.5) | % | |||||||||||||||||||||||
Total sales(b) | (2.6) | % | |||||||||||||||||||||||
Average number of customers | 1.0 | % | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
(a) | Major components of retail sales. | ||||||||||||||||||||||||
(b) | Consists of all components of sales, including all billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. | ||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Six Months Ended June 30, 2013 as Compared to June 30, 2012
Operating Revenues. The variance was primarily due to:
·An $186 million decrease in fuel revenues primarily due to the impact of lower residential fuel rates, including amortization associated with the 2012 FPSC Settlement Agreement, and a decrease in GWh retail sales due to weather,
·An $11 million decrease in sales to retail customers due to unfavorable weather. The number of cooling degree days for the first half of 2013 were 1% above normal compared to 12% above normal in the same period 2012. Partially offsetting the unfavorable cooling degree day variance, the number of heating degree days for the first half of 2013 were 5% below normal compared to 30% below normal for the same period 2012, and
·An $8 million decrease in weather-normal retail volumes primarily related to unfavorable volumes in the residential and general services sectors.
Partially offsetting these decreases were:
·An $81 million increase in base revenues primarily due to a retail base rate increase effective January 1, 2013, and
·A $41 million increase in capacity clause revenues primarily due to an increase in recovery rates related to the proposed Levy project effective January 1, 2013.
Operating Expenses. The variance was primarily due to:
·A $345 million impairment charge under the 2013 FPSC Settlement agreement. This charge is primarily comprised of $295 million related to the agreement to forego recovery of a portion of the Crystal River Unit 3 regulatory asset, and a $65 million charge to write-off the wholesale portion of Levy investments. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information, and
·A $23 million increase in depreciation and amortization primarily due to higher nuclear cost-recovery amortization related to Levy.
Partially offsetting these increases were:
·A $167 million decrease in fuel expense primarily due to the application of the NEIL settlement proceeds as well as lower system requirements,
121
PART I
·A $6 million decrease in operations and maintenance expenses primarily due to the deferral of Crystal River Unit 3 related expenses, including severance costs, in accordance with the 2012 FPSC Settlement Agreement as well as the prior year write off of previously deferred costs related to the vendor not selected costs for the Crystal River Unit 3 containment repair. Partially offsetting these favorable variances was the prior year reversal of accruals in conjunction with the placement of Crystal River Unit 3 into safe storage (SAFSTOR) in accordance with the 2012 FPSC Settlement Agreement.
Interest Expense. The variance was primarily due to a reduction recorded in 2013 for the return on the retail portion of the retired Crystal River Unit 3 regulatory asset beginning January 1, 2013.
Income Tax Expense. The variance was primarily due to a decrease in pretax income. The effective tax rate for the six months ended June 30, 2013 and 2012 was 39.8% and 37.5%, respectively. The increase in the effective tax rate was primarily due to charges related to the 2013 FPSC settlement agreement and the favorable prior year tax benefit related to the manufacturing deduction and the impact of lower AFUDC equity in 2013.
Matters Impacting Future Duke Energy Florida Results
The FPSC is reviewing the prudence of the retirement decision, the mediated resolution of insurance claims with NEIL, and recovery of regulatory assets related to Duke Energy Florida’s Crystal River Unit 3. A procedural schedule has been established providing for hearings in October 2013. On August 1 2013, Duke Energy Florida, the Florida Office of Public Counsel and other customer advocates filed a Revised and Restated Stipulation and Settlement Agreement (2013 Settlement) with the FPSC. If approved, the 2013 Settlement will replace and supplant the 2012 Settlement and substantially resolve additional issues, including (i) matters related to Crystal River Unit 3, (ii) Levy, (iii) Crystal River 1 and 2 coal units, and (iv) future generation needs in Florida. Duke Energy Florida’s financial condition, results of operations and cash flows could be adversely impacted if the FPSC issues an unfavorable ruling on the 2013 Settlement Agreement. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
122
PART I
DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 2013 and 2012.
The results of operations and variance discussion for Duke Energy Ohio is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
RESULTS OF OPERATIONS
|
|
| Six Months Ended June 30, | |||||||
|
|
|
|
|
|
|
|
| Increase | |
(in millions) | 2012 |
| 2011 |
| (Decrease) | |||||
Operating revenues | $ | 1,629 |
| $ | 1,573 |
| $ | 56 | ||
Operating expenses |
| 1,398 |
|
| 1,381 |
|
| 17 | ||
Gains on sales of other assets and other, net |
| 2 |
|
| 2 |
|
| ― | ||
Operating income |
| 233 |
|
| 194 |
|
| 39 | ||
Other income and expenses, net |
| 8 |
|
| 9 |
|
| (1) | ||
Interest expense |
| 49 |
|
| 51 |
|
| (2) | ||
Income before income taxes |
| 192 |
|
| 152 |
|
| 40 | ||
Income tax expense |
| 73 |
|
| 46 |
|
| 27 | ||
Net Income | $ | 119 |
| $ | 106 |
| $ | 13 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| Six Months Ended June 30, | |||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance | ||||||||||||||||||||
Operating Revenues | $ | 1,558 |
| $ | 1,629 |
| $ | (71) | |||||||||||||||||
Operating Expenses |
| 1,471 |
|
| 1,398 |
|
| 73 | |||||||||||||||||
Gains on Sales of Other Assets and Other, net |
| 4 |
|
| 2 |
|
| 2 | |||||||||||||||||
Operating Income |
| 91 |
|
| 233 |
|
| (142) | |||||||||||||||||
Other Income and Expenses, net |
| 3 |
|
| 8 |
|
| (5) | |||||||||||||||||
Interest Expense |
| 36 |
|
| 49 |
|
| (13) | |||||||||||||||||
Income Before Income Taxes |
| 58 |
|
| 192 |
|
| (134) | |||||||||||||||||
Income Tax Expense |
| 21 |
|
| 73 |
|
| (52) | |||||||||||||||||
Net Income | $ | 37 |
| $ | 119 |
| $ | (82) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
The following table presents the percentage change in GWh sales and average number of customers for Duke Energy Ohio. Except as otherwise noted, the below percentages represent billed sales only for the periods presented and are not weather normalized. | |||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Increase (decrease) over prior year | 2013 |
| |||||||||||||||||||||||
Residential sales(a) | 7.3 | % | |||||||||||||||||||||||
General service sales(a) | 1.5 | % | |||||||||||||||||||||||
Industrial sales(a) | (0.3) | % | |||||||||||||||||||||||
Wholesale power sales | 49.0 | % | |||||||||||||||||||||||
Total sales(b) | 1.5 | % | |||||||||||||||||||||||
Average number of customers | 0.4 | % | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
(a) | Major components of retail sales. | ||||||||||||||||||||||||
(b) | Consists of all components of sales, including all billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. | ||||||||||||||||||||||||
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|
| ||||||||||||||||||||||
85
PART I
The increase in Duke Energy Ohio’s net income for the six months endedSix Months Ended June 30, 2012 compared2013 as Compared to June 30, 2011 was primarily due to the following factors:2012
Operating Revenues. The increasevariance was primarily driven by:
· A $116$100 million increasedecrease in regulated fuelPJM capacity revenues driven primarily by higher purchased power revenues collected under the new Ohio ESP which became effective January 1,related to lower average cleared capacity auction pricing in 2013 compared to 2012, partially offset by reduced gas sales volumes and lower natural gas costs;
· A $33$23 million increasedecrease in net mark-to-market revenues on non-qualifying power and capacity hedge contracts, consisting of mark-to-market losses of $1 million in 2013 compared to gains of $22 million in 2012, compared to losses of $11 million in 2011;
·A $28 million increase primarily due to PJM capacity revenues associated with the move of the coal-fired generation assets from MISO to PJM in 2012, net of a decrease related to lower average cleared auction pricing in 2012 compared to 2011 for the gas-fired generation assets; and
· A $10$23 million decrease in regulated fuel revenues primarily driven by reduced sales volumes, partially offset by higher fuel costs.
Partially offsetting these decreases were:
·A $34 million increase in rate riders and retail pricing primarily due to an electric rate increase in 2013,
·A $21 million increase in electric revenues from the gas-fired generation assets driven primarily by increased volumes,higher power prices, partially offset by lower power prices.decreased volumes, and
Partially offsetting these increases were:
· A $131$13 million decreaseincrease in electricretail revenues from the coal-fired generation assets driven primarily by the expiration of the 2009-2011 ESP, partially offset by the coal-fired generation assets participatingrelated to favorable weather conditions in the PJM wholesale energy market.2013 compared to 2012.
Operating Expenses. The increasevariance was primarily driven by:
· A $107$49 million increase in regulated fuel expense driven primarily by higher purchased power expense as a result of the new Ohio ESP, net of stability charge revenues, partially offset by reduced gas sales volumes and lower natural gas costs.
Partially offsetting these increases were:
·A $31 million decrease in fuel expense forexpenses from the gas-fired generation assets driven by lowerhigher natural gas costs, partially offset by higher volumes;lower natural gas volumes,
· A $31$16 million decreaseincrease in operatingnet mark-to-market fuel expense on non-qualifying fuel hedge contracts, consisting of mark-to-market losses of $17 million in 2013 compared to losses of $1 million in 2012, and maintenance expenses resulting primarily from higher prior year station outages and regulatory asset amortization expense;
· A $15 million decreaseincrease due to the receiptprior year collection of funds in 2012 related to a previously written off receivable associated with the Lehman Brothers bankruptcy; andbankruptcy.
· A $13$14 million decreaseincrease in depreciation and amortization costs related primarily to regulatory amortization and deferrals,
Partially offsetting these increases was:
123
PART I
·A $28 million decrease in regulated fuel expense driven primarily by lower purchased power expense and reduced volumes, partially offset by higher fuel costs.
Interest Expense. The decrease was primarily due to lower regulatory and software amortization.average debt balances in 2013 compared to 2012.
Income Tax Expense.The increase in income tax expense isvariance was primarily due to an increasea decrease in pretax income. The effective tax rate for the six months ended June 30, 2013 and 2012 was 35.9% and 2011, was 38.1% and 30.4%, respectively. The increasechange in the effective tax rate iswas primarily due to a reductionone time true up of accumulated deferred income taxes in prior year state deferred tax liabilities.the second quarter of 2012.
Matters Impacting Future Duke Energy Ohio Results
Duke Energy Ohio’s gas-fired non-regulated generation assets earn capacity revenues from PJM. PJM capacity prices are determined through an auction process for planning years from June through MayOhio has a proceeding pending before the Public Utilities Commission of the following year and are conducted approximately three years in advance of the capacity delivery period. Capacity prices, for periods beginning June 2011 and continuing through May 2014 will be significantly lower than current and historical capacity prices. As a result,Ohio (PUCO) related to remediation costs associated with former manufactured gas plants (MGP) sites. Duke Energy Ohio’s operating revenuesfinancial condition, results of operations and net income will be negatively impacted through 2014.
Duke Energy Ohio filed electric and gas distribution rate cases in July 2012. These planned rate cases are needed to recover capital investments and operating costs. Duke Energy Ohio’s earningscash flows could be adversely impacted if these rate cases are denied or delayed by the statePUCO issues an unfavorable ruling on the MGP proceeding. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
The current low energy price projections, as well as recently issued and proposed environmental regulations pertaining to coal and coal-fired generating facilities, and outcomes of pending regulatory commission.proceedings could impact future cash flows and market valuations of Duke Energy Ohio’s coal-fired generation assets which could lead to impairment charges.
124
PART I
DUKE ENERGY INDIANA
INTRODUCTION
Management’s Discussion and Analysis should be read in conjunction with Duke Energy Indiana’s Unauditedthe accompanying Condensed Consolidated Financial Statements.
Duke Energy Indiana is an indirect wholly owned subsidiary of Duke Energy. Duke Energy Indiana is an electric utility company that generates, transmits, distributesStatements and sells electricity in north central, centralNotes for the six months ended June 30, 2013 and southern Indiana.
BASIS OF PRESENTATION2012.
The results of operations and variance discussion for Duke Energy Indiana is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
RESULTS OF OPERATIONS
|
|
| Six Months Ended June 30, | |||||||
|
|
|
|
|
|
|
|
| Increase | |
(in millions) | 2012 |
| 2011 |
| (Decrease) | |||||
Operating revenues | $ | 1,373 |
| $ | 1,279 |
| $ | 94 | ||
Operating expenses |
| 1,511 |
|
| 1,040 |
|
| 471 | ||
Operating (loss) income |
| (138) |
|
| 239 |
|
| (377) | ||
Other income and expenses, net |
| 42 |
|
| 44 |
|
| (2) | ||
Interest expense |
| 70 |
|
| 70 |
|
| ― | ||
(Loss) income before income taxes |
| (166) |
|
| 213 |
|
| (379) | ||
Income tax (benefit) expense |
| (76) |
|
| 69 |
|
| (145) | ||
Net (loss) income | $ | (90) |
| $ | 144 |
| $ | (234) |
86
PART I
|
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|
|
|
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| ||||||||||||||||
|
| Six Months Ended June 30, | |||||||||||||||||||||||
(in millions) | 2013 |
| 2012 |
| Variance | ||||||||||||||||||||
Operating Revenues | $ | 1,424 |
| $ | 1,373 |
| $ | 51 | |||||||||||||||||
Operating Expenses |
| 1,075 |
|
| 1,511 |
|
| (436) | |||||||||||||||||
Operating Income (Loss) |
| 349 |
|
| (138) |
|
| 487 | |||||||||||||||||
Other Income and Expenses, net |
| 10 |
|
| 42 |
|
| (32) | |||||||||||||||||
Interest Expense |
| 84 |
|
| 70 |
|
| 14 | |||||||||||||||||
Income (Loss) Before Income Taxes |
| 275 |
|
| (166) |
|
| 441 | |||||||||||||||||
Income Tax Expense (Benefit) |
| 103 |
|
| (76) |
|
| 179 | |||||||||||||||||
Net Income (Loss) | $ | 172 |
| $ | (90) |
| $ | 262 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
The following table presents the percentage change in GWh sales and average number of customers for Duke Energy Indiana. Except as otherwise noted, the below percentages represent billed sales only for the periods presented and are not weather normalized. | |||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Increase (decrease) over prior year | 2013 |
| |||||||||||||||||||||||
Residential sales(a) | 9.7 | % | |||||||||||||||||||||||
General service sales(a) | 1.0 | % | |||||||||||||||||||||||
Industrial sales(a) | (1.7) | % | |||||||||||||||||||||||
Wholesale power sales | (12.9) | % | |||||||||||||||||||||||
Total sales(b) | (1.9) | % | |||||||||||||||||||||||
Average number of customers | 0.7 | % | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
(a) | Major components of retail sales. | ||||||||||||||||||||||||
(b) | Consists of all components of sales, including all billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. | ||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Duke Energy Indiana’s net loss for the six months endedSix Months Ended June 30, 2012 compared2013 as Compared to net income for the six months ended June 30, 2011 was primarily due to the following factors:2012
Operating Revenues. The increasevariance was primarily due to:
· A $100$46 million net increase in fuel revenues (including emissions allowances)rate riders primarily duerelated to increase in fuel rates as a result of higher fuel and purchased power costs;recoveries under the IGCC rider, and
· A $10An $11 million net increase in rate pricingrevenue due to the positive impact on overall average prices of lower sales volumes.favorable weather.
Partially offsetting these increases were:was:
· An $8 million decrease in retail revenues relatedoverall average rate realization due primarily to unfavorable weather conditions in 2012 compared to 2011.the declining block rate structure for residential sales.
Operating Expenses. The increasevariance was primarily due to:
· A $420 million increasedecrease due to 2012prior year impairment and other charges related to the Edwardsport IGCC plant, that is currently under construction. See Note 4 to the Unaudited Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information; and
· A $92 million increase in fuel costs primarily due to higher purchases of power (reflective of favorable market prices); and increased generation cost at coal plants due to higher generation levels.
Partially offsetting these increases were:
·A $32$39 million decrease in operation and maintenance primarilydepreciation expense due to higher storm costs ina regulatory order related to the prior year, and lower generation and outage maintenance costs.Edwardsport IGCC plant to update the depreciation rates, with a portion of the reduction being credited to retail customers through the IGCC rider.
Other Income Tax (Benefit) Expense. and Expenses, net.The decrease in income tax (benefit) expense iswas primarily due to a decrease in AFUDC equity mainly due to the implementation of new customer rates related to the IGCC rider in January 2013.
Interest Expense. A $15 million decrease in capitalized interest primarily due to the implementation of new customer rates related to the IGCC rider in January 2013.
Income Tax Expense (Benefit). The variance was primarily due to an increase in pretax income. The effective tax rate for the six months ended June 30, 2013 and 2012 was 37.5% and 2011, was 45.7% and 32.3%, respectively. The increasedecrease in the effective tax rate iswas primarily due to the decrease in pretax income resulting from thein 2013 compared to pretax loss in 2012 impairment and other charges related to the Edwardsport IGCC project.impairment and the impact of AFUDC equity that reduces the tax expense compared to higher AFUDC equity in 2012 which increased the tax benefit.
Matters Impacting Future Duke Energy Indiana Results125
Duke Energy Indiana results are impacted by the completion of its major generation fleet modernization project. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for a discussion of the significant increase in the estimated cost of the 618 MW Edwardsport IGCC plant. Additional updates to the cost estimate could occur through the completion of the plant in 2013. On April 30, 2012, Duke Energy Indiana entered into a settlement agreement with certain intervenors to cap the construction cost recoverable in retail rates which resulted in the recognition of a $420 million pre-tax charge to earnings in the first quarter of 2012. The agreement is subject to approval by the IURC, a final order is expected by the end of 2012. Duke Energy Indiana is unable to predict the ultimate outcome of these proceedings. In the event the IURC disallows a portion of the remaining plant costs, including financing costs, or if the cost estimates for the plant increase, additional charges to expense, which could be material, could occur.
PART I
LIQUIDITY AND CAPITAL RESOURCES
The following discussion of liquidity and capital resources is on a consolidated Duke Energy basis. Duke Energy’s significant cash requirements are largely due to the capital intensive nature of its operations, including capital expansion projects, fleet modernization and other expenditures for environmental compliance. Duke Energy relies upon its cash flows from operations, as well as its ability to access the long-term debt and equity capital markets for sources of domestic liquidity. Additionally, Duke Energy has access to an unsecured revolving credit facilities,facility, which areis not restricted upon general market conditions, as discussed further below.
Cash Flow Information
The following table summarizes Duke Energy’s cash flows.
|
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|
|
|
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| |||||||
|
| Six Months Ended June 30, | ||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||
Cash flows provided by (used in): |
|
|
|
|
|
| ||||||||
| Operating activities |
| $ | 2,843 |
| $ | 2,002 | |||||||
| Investing activities |
|
| (2,562) |
|
| (2,391) | |||||||
| Financing activities |
|
| (134) |
|
| (195) | |||||||
Net increase (decrease) in cash and cash equivalents |
|
| 147 |
|
| (584) | ||||||||
Cash and cash equivalents at beginning of period |
|
| 1,424 |
|
| 2,110 | ||||||||
Cash and cash equivalents at end of period |
| $ | 1,571 |
| $ | 1,526 | ||||||||
|
|
|
|
|
|
|
| |||||||
OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows:
| The following table summarizes Duke Energy’s cash flows: | |||||
|
|
|
|
|
|
|
|
| Six Months Ended June 30, | ||||
(in millions) |
| 2012 |
|
| 2011 | |
Cash flows provided by (used in): |
|
|
|
|
| |
| Operating activities | $ | 2,002 |
| $ | 1,717 |
| Investing activities |
| (2,391) |
|
| (1,838) |
| Financing activities |
| (195) |
|
| (187) |
Net decrease in cash and cash equivalents |
| (584) |
|
| (308) | |
Cash and cash equivalents at beginning of period |
| 2,110 |
|
| 1,670 | |
Cash and cash equivalents at end of period | $ | 1,526 |
| $ | 1,362 |
|
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| |||||||||||||||||||
|
| Six Months Ended June 30, | ||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||||||||
Net income |
| $ | 976 |
| $ | 747 | ||||||||||||||||||||
Non-cash adjustments to net income |
|
| 2,367 |
|
| 1,463 | ||||||||||||||||||||
Working capital |
|
| (500) |
|
| (208) | ||||||||||||||||||||
Net cash provided by operating activities |
| $ | 2,843 |
| $ | 2,002 | ||||||||||||||||||||
|
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| |||||||||||||||||||
The variance was driven primarily by: | ||||||||||||||||||||||||||
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|
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|
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|
| |||||||||||||||||||
• | A $1,133 million increase in net income after non-cash adjustments, mainly due to the inclusion of Progress Energy's results, beginning July 2, 2012, the impact of rate cases, retail rider adjustments and favorable weather, net of lower PJM capacity revenues. | |||||||||||||||||||||||||
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| This increase was partially offset by: |
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| |||||||||||||||||||
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| |||||||||||||||||||
• | A $292 million decrease in traditional working capital, mainly due to an increase in the incentive pay-out and prior year over collection of the Carolinas' fuel costs, net of NEIL proceeds. | |||||||||||||||||||||||||
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| |||||||||||||||||||
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows.
| Operating Cash Flows. The following table summarizes key components of Duke Energy’s operating cash flows. | |||||
|
|
|
|
|
|
|
|
| Six Months Ended June 30, | ||||
(in millions) |
| 2012 |
|
| 2011 | |
Net income | $ | 747 |
| $ | 954 | |
Non-cash adjustments to net income |
| 1,463 |
|
| 1,283 | |
Working capital |
| (208) |
|
| (520) | |
Net cash provided by operating activities | $ | 2,002 |
| $ | 1,717 | |
|
|
|
|
|
|
|
The increase in cash provided by operating activities in 2012 as compared to 2011 was driven primarily by: | ||||||
• | A $250 million increase in traditional working capital, mainly due to prior year refund of North Carolina overcollected fuel costs and current year overcollection of North Carolina and South Carolina fuel costs. |
|
|
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| |||||||||||||||||||
|
| Six Months Ended June 30, | ||||||||||||||||||||||||
(in millions) | 2013 |
| 2012 | |||||||||||||||||||||||
Capital, investment and acquisition expenditures |
| $ | (2,764) |
| $ | (2,297) | ||||||||||||||||||||
Available for sale securities, net |
|
| (52) |
|
| (85) | ||||||||||||||||||||
Proceeds from sales of equity investments and other assets, and sales of and collections on notes receivable |
|
| 38 |
|
| 23 | ||||||||||||||||||||
Other investing items |
|
| 216 |
|
| (32) | ||||||||||||||||||||
Net cash used in investing activities |
| $ | (2,562) |
| $ | (2,391) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||
The variance was primarily due to the following: | ||||||||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||
• | A $467 million increase in capital, investment and acquisition expenditures primarily due to the inclusion of Progress Energy's capital expenditures beginning July 2, 2012, net of lower spending on Duke Energy's renewable energy wind projects and ongoing infrastructure modernization program as these projects near completion. | |||||||||||||||||||||||||
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| |||||||||||||||||||
| This increase was partially offset by: |
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| |||||||||||||||||||
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• | A $192 million return of collateral related to the Chilean hydro acquisition. | |||||||||||||||||||||||||
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| |||||||||||||||||||
87126
PART I
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows.
| Investing Cash Flows. The following table summarizes key components of Duke Energy’s investing cash flows. | |||||
|
|
|
|
|
|
|
|
| Six Months Ended June 30, | ||||
(in millions) |
| 2012 |
|
| 2011 | |
Capital, investment and acquisition expenditures | $ | (2,297) |
| $ | (1,991) | |
Available for sale securities, net |
| (85) |
|
| 15 | |
Proceeds from sales of equity investments and other assets, and sales of and collections on notes receivable |
| 23 |
|
| 109 | |
Other investing items |
| (32) |
|
| 29 | |
Net cash used in investing activities | $ | (2,391) |
| $ | (1,838) | |
|
|
|
|
|
|
|
The increase in cash used in investing activities in 2012 as compared to 2011 was driven primarily by: | ||||||
• | A $310 million increase in capital, investment and acquisition expenditures due to the timing of payments related to Duke Energy's ongoing infrastructure modernization program, | |||||
• | A $100 million decrease in proceeds of available for sale securities, net of purchases, and | |||||
• | A $90 million decrease primarily as a result of the prior year sale of Windstream Corp. stock received in conjunction with the sale of Q-Comm Corporation in December 2010. |
| Financing Cash Flows. The following table summarizes key components of Duke Energy’s financing cash flows. | |||||||||||||||||||||||||||
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| Six Months Ended June 30, |
|
| Six Months Ended June 30, | |||||||||||||||||||||||
(in millions) | (in millions) |
| 2012 |
| 2011 | (in millions) | 2013 |
| 2012 | |||||||||||||||||||
Issuance of common stock related to employee benefit plans | Issuance of common stock related to employee benefit plans | $ | 14 |
| $ | 10 | Issuance of common stock related to employee benefit plans | $ | 7 |
| $ | 14 | ||||||||||||||||
(Payments) Issuances of long-term debt, net |
| (157) |
| 417 | ||||||||||||||||||||||||
Issuance of long-term debt, net | Issuance of long-term debt, net |
| 294 |
|
| (157) | ||||||||||||||||||||||
Notes payable and commercial paper | Notes payable and commercial paper |
| 631 |
| 63 | Notes payable and commercial paper |
| 763 |
|
| 631 | |||||||||||||||||
Dividends paid | Dividends paid |
| (670) |
| (657) | Dividends paid |
| (1,085) |
|
| (670) | |||||||||||||||||
Other financing items | Other financing items |
| (13) |
| (20) | Other financing items |
| (113) |
|
| (13) | |||||||||||||||||
Net cash used in financing activities | Net cash used in financing activities | $ | (195) |
| $ | (187) | Net cash used in financing activities | $ | (134) |
| $ | (195) | ||||||||||||||||
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|
| ||||||||||||||||
The increase in cash used in financing activities in 2012 as compared to 2011 was driven primarily by: | ||||||||||||||||||||||||||||
The variance was due primarily to the following: | The variance was due primarily to the following: | |||||||||||||||||||||||||||
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| ||||||||||||||||
• | A $570 million increase in payments for the redemption of long-term debt net of issuances, primarily due to the timing of redemptions and issuances between years and | • | A $451 million increase in net issuances of long-term debt, primarily due to the timing of issuances and redemptions across years. | |||||||||||||||||||||||||
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| ||||||||||||||||
• | A $10 million increase in dividends paid in 2012 due to an increase in dividends per share from $0.735 to $0.75 in the third quarter of 2011. | • | A $132 million increase in proceeds from net issuances of notes payable and commercial paper, primarily to fund the short-term working capital needs of the Duke Energy Registrants. | |||||||||||||||||||||||||
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These increases in cash provided were partially offset by: | These increases in cash provided were partially offset by: | |||||||||||||||||||||||||||
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• | A $570 million increase in net proceeds from the issuance of Commercial Paper and increased outstanding PremierNotes. | • | A $415 million increase in quarterly dividends primarily due to an increase in common shares outstanding, resulting from the merger with Progress Energy and an increase in dividends per share from $0.75 to $0.765 beginning in the third quarter of 2012. | |||||||||||||||||||||||||
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Significant Notes Payable and Long-Term Debt Activities - 2012. – 2013
DS Cornerstone, LLC, a 50/50 joint venture entity with a third-party joint venture partner, owns two wind generation projects and has executed a third party financing againstThe following table summarizes the two against the two wind generation projects. In April 2012, Duke Energy and SCOA negotiated a $330 million, Construction and 12-year amortizing Term Loan Facility, on behalf of the borrower, a wholly owned subsidiary of the joint venture. The loan agreement is non-recourse to Duke Energy. Duke Energy received proceeds of $319 million upon execution of the loan agreement. This amount represents reimbursement of aRegistrants’ significant portion of Duke Energy’s construction costs incurred as of the date of the agreement.debt issuances since December 31, 2012 (in millions).
In March 2012, Duke Energy Indiana issued $250 million principal amount of first mortgage bonds, which carry a fixed interest rate of 4.20% and mature March 15, 2042. Proceeds from the issuance were used to repay a portion of Duke Energy Indiana’s outstanding short-term debt.
In January 2012, Duke Energy Carolinas used proceeds from its December 2011 $1 billion issuance of principal amount of first mortgage bonds to repay $750 million 6.25% senior unsecured notes that matured January 15, 2012.
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January 2013(a) | January 2073 | 5.125 | % |
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June 2013(b) | June 2018 | 2.100 | % |
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February 2013(c)(d) | December 2030 | 2.043 | % |
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February 2013(c) | June 2037 | 4.740 | % |
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April 2013(e) | April 2026 | 5.456 | % |
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March 2013(f) | March 2043 | 4.100 | % |
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July 2013(h) | July 2043 | 4.900 | % |
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(a) | Callable after January 2018 at par. Proceeds from the issuance were used to redeem the $300 million 7.10% Cumulative Quarterly Income Preferred Securities (QUIPS). The securities were redeemed at par plus accrued and unpaid distributions, payable upon presentation on the redemption date. The remaining net proceeds were used to repay a portion of outstanding commercial paper and for general corporate purposes. See Note 11 for additional information about the QUIPS. | ||||||||||||||||||||||||||||||||||||||
(b) | Proceeds from the issuance were used to repay at maturity the $250 million 5.65% senior notes due June 15, 2013. The remaining net proceeds were used for general corporate purposes, including the repayment of outstanding commercial paper. | ||||||||||||||||||||||||||||||||||||||
(c) | Represents the conversion of construction loans related to a renewable energy project issued in December 2012 to term loans. No cash proceeds were received in conjunction with the conversion. The term loans have varying maturity dates. The maturity date presented represents the latest date for all components of the respective loans. | ||||||||||||||||||||||||||||||||||||||
(d) | The debt is floating rate. Duke Energy has entered into a pay fixed-receive floating interest rate swap for 95 percent of the loans. | ||||||||||||||||||||||||||||||||||||||
(e) | Represents primarily the conversion of a $190 million bridge loan issued in conjunction with the acquisition of Ibener in December 2012. Duke Energy received incremental proceeds of $40 million upon conversion of the bridge loan. The debt is floating rate and is denominated in U.S. dollars. Duke Energy has entered into a pay fixed-receive floating interest rate swap for 75 percent of the loan. | ||||||||||||||||||||||||||||||||||||||
(f) | Proceeds from the issuance were used to repay notes payable to affiliated companies as well as for general corporate purposes. | ||||||||||||||||||||||||||||||||||||||
(g) | Callable after June 2023 at par. Proceeds from the issuance were used to redeem the $48 million 5.375% First Mortgage Bonds due February 2017, which were called for redemption on June 7, 2013. | ||||||||||||||||||||||||||||||||||||||
(h) | Proceeds from the issuances will be used to repay the $400 million, 5.00% unsecured debt due September 15, 2013. | ||||||||||||||||||||||||||||||||||||||
(i) | The debt is floating rate based on 3-month LIBOR and a fixed credit spread of 35 basis points. | ||||||||||||||||||||||||||||||||||||||
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88127
PART I
On April 4, 2011,CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current maturities of long-term debt on the Duke Energy filed a registration statement (Form S-3)Registrants’ respective Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with proceeds from additional borrowings, unless otherwise noted.
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(in millions) | Maturity Date | Interest Rate |
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Duke Energy (Parent) | February 2014 | 6.300 | % |
| $ | 750 | ||||
Progress Energy (Parent) | March 2014 | 6.050 | % |
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Duke Energy Progress | September 2013 | 5.125 | % |
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Duke Energy Carolinas | November 2013 | 5.750 | % |
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Duke Energy issues unsecured senior notes, called InterNotes, due one year to 30 years from the Securitiesdate of issuance. The InterNotes are issued in the retail markets as direct, unsecured and Exchange Commission (SEC)unsubordinated obligations of Duke Energy Corporation. The net proceeds from the sale of InterNotes are used to sell up to $1 billion (maximumfund capital expenditures in Duke Energy’s unregulated businesses and for general corporate purposes. InterNotes of $500$112 million of notesand $35 million, with maturities ranging from 10 to14 years were outstanding at any particular time)June 30, 2013 and December 31, 2012, respectively. The notes reflect long-term debt obligations of Duke Energy and are reflected as Long-term debt on Duke Energy’s Condensed Consolidated Balance Sheets.
Duke Energy issues variable denomination floating rate demand notes, called PremierNotes. The notes are offered on a continuous basis and bear interest at a floating rate per annum determined by the Duke Energy PremierNotes Committee, or its designee, on a weekly basis. The interest rate payable on notes held by an investor may vary based on the principal amount of the investment. The notes have no stated maturity date, but may be redeemed in whole or in part by Duke Energy at any time. The notes are non-transferable and may be redeemed in whole or in part at the investor’s option. Proceeds from the sale of the notes will beare used for general corporate purposes. The balance asPremierNotes of $621 million and $395 million, were outstanding at June 30, 20122013 and December 31, 2011, is $209 million and $79 million,2012, respectively. The notes reflect a short-term debt obligation of Duke Energy and will beare reflected as Notes Payable and Commercial Paper on Duke Energy’s Condensed Consolidated Balance Sheets.
Available Credit Facilities and Restrictive Debt Covenants.Other Information
In November 2011, MASTER CREDIT FACILITY SUMMARY
Duke Energy entered intohas a new $6 billion, five-year master credit facility. The credit facility with $4has a capacity of $6 billion available at closingthrough November 2016 and the remaining $2$5.63 billion available following successful completion of the merger with Progress Energy.through November 2017. The Duke Energy Registrants each have borrowing capacity under the master credit facility up to specified sublimits for each borrower. However, Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. See the table below for the borrowing sublimits for each of the borrowers including Progress Energy Carolinas and Progress Energy Florida as of July 2, 2012.June 30, 2013. The amount available under the master credit facility is reduced by the use of the master credit facility to backstop the issuances of commercial paper, certain letters of credit and certainvariable rate demand tax-exempt bonds.bonds that may be put to the Duke Energy Registrants at the option of the holder. Borrowing sub limitssublimits for the Subsidiary Registrants are also reduced for amounts outstanding under the money pool arrangement.
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(in millions) |
| Duke Energy (Parent) |
| Duke Energy Carolinas |
| Progress Energy Carolinas |
| Progress Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana |
| Total Duke Energy | (in millions) | Duke Energy (Parent) |
| Duke Energy Carolinas |
| Duke Energy Progress |
| Duke Energy Florida |
| Duke Energy Ohio |
| Duke Energy Indiana |
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Facility Size |
| $ | 1,750 |
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| $ | 750 |
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Facility size(a) | Facility size(a) | $ | 1,750 |
| $ | 1,250 |
| $ | 750 |
| $ | 750 |
| $ | 750 |
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Reduction to backstop issuances | Reduction to backstop issuances |
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Available capacity | Available capacity | $ | 1,462 |
| $ | 868 |
| $ | 551 |
| $ | 741 |
| $ | 221 |
| $ | 519 |
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(a) | Represents the sublimit of each borrower at June 30, 2013. The Duke Energy Ohio sublimit includes $100 million for Duke Energy Kentucky. | ||||||||||||||||||||||||||||||||||||||||
(b) | Duke Energy issued $450 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas and Duke Energy Indiana. The balances are classified as long-term borrowings within Long-term Debt in Duke Energy Carolina’s and Duke Energy Indiana’s Condensed Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||||||||||
FIRST MORTGAGE BOND RESTRICTIONS
First Mortgage Bond Restrictions.The Subsidiary Registrants’ first mortgage bonds including those of Progress Energy Carolinas’ and Progress Energy Florida’s, are secured under their respective mortgage indentures. Each mortgage constitutes a first lien on substantially all of the fixed properties of the respective company, subject to certain permitted encumbrances and exceptions. The lien of each mortgage also covers subsequently acquired property. Each mortgage allows the issuance of additional first mortgage bonds based on property additions, retirements of first mortgage bonds and the deposit of cash if certain conditions are satisfied. InMost of the Subsidiary Registrants are required to pass a “net earnings” test in order to issue new first mortgage bonds, other than on the basis of retired bonds the mortgage bond indentures requireunder certain circumstances. The test requires that the issuer’s adjusted net earnings, which isare calculated based on results for 12 consecutive months within the prior 15 to 18 months, be at least twice the annual interest requirement for bonds currently outstanding and to
128
PART I
be outstanding. ProgressDuke Energy Florida’sIndiana’s and Duke Energy Indiana’s ratioFlorida’s ratios of net earnings to the annual interest requirement for bonds outstanding washave at times in the past two years been below 2.0 times, at June 30, 2012. Progress Energy Florida’sdue to various charges to operating expenses. As discussed in Note 4 of the Condensed Consolidated Financial Statements, “Regulatory Matters,” these charges and any future charges may impact future net earnings were impacted by a $288 million pre-tax charge recorded in December 2011 for amounts to be refunded to customers undertests and affect the termsability of a February 2012 settlement agreement approved by the Florida Public Service Commission. Duke Energy Indiana’s net earnings were impacted by a $420 million pre-tax charge recorded in the first quarter of 2012 related to the Edwardsport IGCC project. Until this ratio is above 2.0 times, Progress Energy Florida’sIndiana and Duke Energy Indiana’s capacityFlorida to issue first mortgage bonds is limited to a portion of retired first mortgage bonds. In the event ProgressDuke Energy Florida’sIndiana’s or Duke Energy Indiana’sFlorida’s long-term debt requirements exceed theirits first mortgage bond capacity, ProgressDuke Energy FloridaIndiana or Duke Energy IndianaFlorida can access alternative sources of capital, including, but not limited to issuing unsecured public debt, or through private placement, borrowing under the money pool, entering into bilateral direct loan arrangements, and, if necessary, utilizing the available capacity under the master credit facility. All of the other Duke Energy Registrants have earnings substantially in excess of the net earnings test requirement for issuing first mortgage bonds.
Restrictive Debt Covenants.RESTRICTIVE DEBT COVENANTS
The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. The master credit facility contains a covenant requiring the debt-to-total capitalization ratio to not exceed 65%65 percent for each borrower. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of June 30, 2012,2013, each of the Duke Energy Registrants was in compliance with all covenants related to its significant debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment, or the acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the significant debt or credit agreements contain material adverse change clauses.
Credit Ratings.CREDIT RATINGS On July 25, 2012, Standard and Poor’s affirmed
Duke Energy and Progress Energy's short-termcertain subsidiaries each hold credit ratings by Fitch Ratings (Fitch), Moody’s Investors Service (Moody’s) and Standard & Poor’s (S&P). Duke Energy’s corporate/issuer credit rating from Fitch, Moody’s and S&P, respectively, as of A-2. StandardJuly 31, 2013 is BBB+, Baa2 and Poor’s also affirmed itsBBB, respectively. On May 13, 2013, S&P revised the ratings onoutlook for Duke Energy Carolinas,and its subsidiaries to stable. The revision reflects the reduced downside risk to credit quality over the intermediate term as a result of management’s efforts since the close of the merger with Progress Energy. As of July 31, 2013, the Duke Energy Carolinas, ProgressRegistrants’ have a stable outlook from Fitch and S&P with the exception of Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana’s first-mortgage bondswhich has a negative outlook at A. However, Standard and Poor’s lowered its corporate credit rating forFitch. On July 9, 2013, Moody’s placed Duke Energy, Duke Energy Carolinas, Duke Energy Indiana, Duke Energy OhioProgress and Duke Energy Kentucky to BBB+ from A- with a negativeIndiana’s long-term debt ratings on review for possible upgrade, and maintained the stable outlook citing lack of transparency and heightened regulatory risk around the CEO transition. Standard and Poor’s affirmed Progress Energy’s corporate credit rating and its subsidiaries ratings at BBB+ as well as its A-2 short-term rating. Standard and Poor’s negative outlook for Duke Energy and all of its subsidiaries’ is based on increased regulatory risk in North Carolina and Florida and concerns over Duke Energy’s ability to successfully integrate Progress Energy.
On July 3, 2012, Moody’s affirmed their ratings for the new merged Duke Energy and its subsidiaries with a stable outlook. On July 6, 2012, Fitch Ratings initiated coverage on Duke Energy and its subsidiaries. These ratings are investment grade and are on stable outlook. On June 22, Fitch Ratings affirmed their ratings for Progress Energy, and its subsidiaries prior to the merger consummation.
A further downgrade below the Duke Energy Registrants’, including Progress EnergyFlorida and its subsidiaries, current investment grade ratings would likely result in an increase in the entities’ borrowing costs, perhaps significantly. In addition, the Duke Energy Registrants’, including Progress EnergyOhio.
Duke Energy’s credit ratings are dependent on, among other factors, the ability to generate sufficient cash to fund capital and investment expenditures and pay dividends on its subsidiaries, potential poolcommon stock, while maintaining the strength of investors and funding sources would likely decrease. A downgrade below investment grade could also require theits current balance sheet. If, as a result of market conditions or other factors, Duke Energy Registrants, including Progress Energyis unable to maintain its current balance sheet strength, or if its earnings and its subsidiaries, to post additional collateral in the form of letters ofcash flow outlook materially deteriorates, Duke Energy’s credit or cash under various commodity contracts and credit agreements and trigger termination clauses in some interest rate derivative agreements, which would require cash payments. All of these events would likely reduce the Duke Energy Registrants’, including Progress Energy and its subsidiaries, liquidity and profitability andratings could have a material adverse effect on the Duke Energy Registrants’, including Progress Energy and its subsidiaries, financial position, results of operations or cash flows.be negatively impacted.
Undistributed Foreign Earnings.Earnings
Undistributed earnings associated with Duke Energy’s foreign operations are considered indefinitely reinvested, thus no U.S. tax is recorded on such earnings. This assertion is based on management’s determination that the cash held in Duke Energy’s foreign jurisdictions is not needed to fund its U.S. operations and that Duke Energy either has invested or has intentions to reinvest such earnings. Duke Energy periodically evaluates the impact of repatriation of cash generated and held in foreign countries. While Duke Energy’s current intent is to indefinitely reinvest foreign earnings, circumstances could arise that may alter that view, including a future change in tax law governing U.S. taxation of foreign earnings or changes in Duke Energy’s U.S. cash flow requirements. If Duke Energy were to decide to repatriate foreign generated and held cash
89
PART I
previously designated as undistributed earnings, recognition of material U.S. federal income tax liabilities would be required to be recognized in the period such determination is made. The cumulative undistributed earnings as of June 30, 2012,2013, on which Duke Energy has not provided deferred U.S. income taxes and foreign withholding taxes is $1.7$2.2 billion. The amount of unrecognized deferred tax liability related to these undistributed earnings is estimated to be between $175$275 million and $225$350 million.
OTHER ISSUES
Global Climate Change.Change
On April 13, 2012, the EPA published in the Federal Register its proposed rule to establish first-time carbon dioxide (CO2) emissions standards for pulverized coal, Integrated Gasification Combined Cycle (IGCC) and natural gas combined cycle electric generating units permitted and constructed in the future. The proposal was never finalized. On June 25, 2013 the President of the United States issued a memorandum directing the EPA to issue a new proposal by September 20, 2013, and to issue a final rule in a timely fashion after considering all public comments, as appropriate.
The Presidential memorandum also directs the EPA to propose CO2 emissions guidelines for existing fossil-fueled electric generating units by June 1, 2014 and finalize the guidelines to develop their own regulations for implementing the guidelines. The memorandum directed the EPA to require the states submit their implementation regulations to EPA for approval by June 30, 2016.
Duke Energy cannot predict the outcome or the potential impact of these to-be-developed regulations.
For other information on global climate change and the potential impacts on Duke Energy, see “Other Issues” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2011.2012.
Merger with Progress Energy Inc. See Note 2 to the Unaudited Condensed Consolidated Financial Statements, “Acquisitions” for information related to Duke Energy’s pending merger with Progress Energy, Inc.
Nuclear Matters.Matters
Following the events at the Fukushima Daiichi nuclear power station in Japan, Duke Energy conducted thorough inspections at each of our fourits three nuclear sites during 2011. Progress Energy also conducted inspections in 2011 at each of its four sites. The initial inspections havedid not identifiedidentify any significant vulnerabilities, however, Duke Energy ishas continued reviewing designs to increaseevaluate safety margins to external events. Emergency-response capabilities, written procedures and engineering specifications were reviewed to verify each site’s ability to respond in the unlikely event of station blackout or record flood. In 2012,blackout. Duke Energy is working to establishwithin the nuclear industry best practices andto improve the safety standards and margin using the three layers of safety approach used in the U.S.: protection, mitigation and emergency response. Emergency equipment is currently being
129
PART II. OTHER INFORMATION
added at each station to perform key safety functions in the event that backup power sources are lost permanently. These improvements are in addition to the numerous layers of safety measures and systems previously in place.
In March 2011, the NRCNuclear Regulatory Commission (NRC) formed a task force to conduct a comprehensive review of processes and regulations to determine whether the agency should make additional improvements to the nuclear regulatory system. On July 13, 2011, the task force proposed a set of improvements designed to ensure protection, enhance accident mitigation, strengthen emergency preparedness and improve efficiency of NRC programs. The recommendations were further prioritized into three tiers based on the safety enhancement level. On March 12, 2012, the NRC issued three regulatory orders requiring safety enhancements related to mitigation strategies to respond to extreme natural events resulting in the loss of power at a plant, ensuring reliable hardened containment vents and enhancing spent fuel pool instrumentation. The
In May 2012, the NRC held public meetings with stakeholders to developendorsed guidance on re-evaluating emergency communications systems and staffing levels and performing seismic and flooding walkdowns. On July 13, 2012, the NRC outlined plans for implementing Tier 2 and Tier 3 recommendations. On August 30, 2012, the NRC issued implementation guidance that is expected to beenable power plants to achieve compliance with the orders issued by the NRC in AugustMarch 2012. Plants are thenwere required to submit implementation plans to the NRC by February 28, 2013, and complete implementation of the safety enhancements within two refueling outages or by December 31, 2016, whichever comes first. Each plant is also required to reassess their seismic and flooding hazards using present-day methods and information, conduct inspections to ensure protection against hazards in the current design basis, and re-evaluate emergency communications systems and staffing levels. In May 2012, the NRC issued guidance on re-evaluating emergency communications systems and staffing levels and performing seismic and flooding walkdowns. The NRC is expected to issue guidance on performing seismic and flooding re-evaluations in November 2012. Notices for Tier 2 and 3 recommendations are expected to be issued later this year.
Duke Energy is committed to compliance with all safety enhancements ordered by the NRC in connection with the March 12, 2012, regulatory orders noted above, the cost of which could be material. Until such time as the NRC mandated reassessment of flooding and seismic hazards is complete the exact scope and cost of compliance modifications to our sites will not be known. Following the announcement that Crystal River Unit 3 would be retired, on February 20, 2013, Duke Energy provided the NRC with a ‘Certification of Permanent Cessation of Power Operations and that Fuel Has Been Permanently Removed from the Reactor.’ Following this announcement, by letter dated May 13, 2013, Duke Energy requested that the NRC rescind the Fukushima Orders focused on safety enhancements related to mitigation strategies to respond to extreme natural events resulting in the loss of power at a plant, and enhancing spent fuel pool instrumentation. The request is currently under review by the NRC.
Duke Energy anticipates investing approximately $500 million in capital and approximately $100 million in operations and maintenance expenses to comply with Fukushima regulatory requirements from 2013-2015. These expenditures will focus on key areas such as coping with natural phenomena, the design of containment vents for boiling water reactor (BWR) units, instrumentation to accurately measure spent fuel pools, water levels and opportunities to augment emergency response. Amounts required to meet these requirements may vary, as the rules are more clearly defined.
On March 19, 2013, the NRC directed the NRC Staff to prepare a revision to its existing rules related to hardened containment vents requiring vents for certain BWR units to be capable of remaining functional during severe accident conditions. On June 6, 2013, the NRC issued an enhanced order directing 31 nuclear reactors, including Duke Energy Progress’ Brunswick Nuclear Station Units 1 and 2 , to further improve their systems for safely venting pressure from their containment buildings during potential accidents. The order requires plants to complete wetwell venting improvements starting in June 2014, depending on refueling schedules. Plants must also analyze drywell venting scenarios, and if necessary, install a drywell venting option starting 2017. Duke Energy cannot predict the financial impact of complying with these severe accident capability requirements and costs of these requirement are not included in the estimates discussed above.
With the NRC’s continuing review of the remaining recommendations, Duke Energy cannot predict to what extent the NRC will impose additional licensing and safety-related requirements, or the costs of complying with such requirements. The tight timeframetime frame required to complete the necessary safety enhancements by no later than 2016 could lead to even higher costs. Upon receipt of additional guidance from the NRC and a collaborative industry review, Duke Energy will be able to determine an implementation plan and associated costs.
New Accounting Standards
See Item 1A, “Risk Factors”, inNote 18 to the 2011 Form 10-KCondensed Consolidated Financial Statements, “New Accounting Standards,” for furthera discussion of applicable risk factors.the impact of new accounting standards.
OFF-BALANCE SHEET ARRANGEMENTSOff-Balance Sheet Arrangements
The following discussion of off balance sheet arrangements and contractual obligations is on a consolidated Duke Energy basis. During the six months ended June 30, 2012,2013, there were no material changes to Duke Energy’s off-balance sheet arrangements. For information on Duke Energy’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2011.2012.
CONTRACTUAL OBLIGATIONSContractual Obligations
Duke Energy enters into contracts that require payment of cash payment at certain specified periods, based on certain specified minimum quantities and prices. During the threesix months ended June 30, 2012,2013, there were no material changes in Duke Energy’s contractual obligations. For an in-depth discussion of Duke Energy’s contractual obligations, see “Contractual Obligations” and “Quantitative and Qualitative Disclosures about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2011.2012.
NEW ACCOUNTING STANDARDSSubsequent Events
The following new Accounting Standards Updates (ASU) have been issued, but have not yet been adopted by Duke Energy, as of June 30, 2012.
ASC 210—Balance Sheet. In December 2011, the FASB issued revised accounting guidanceSee Note 19 to amend the existing disclosure requirements for offsetting financial assets and liabilities to enhance current disclosures, as well as to improve comparability of balance sheets prepared under U.S. GAAP and IFRS. The revised disclosure guidance affects all companies that have financial instruments and derivative instruments that are either offset in the balance sheet (i.e., presented on a net basis) or subject to an enforceable master netting arrangement and/or similar agreement. The revised guidance requires that certain enhanced quantitative and qualitative disclosures be made with respect to a company’s netting arrangements and/or rights of setoff associated with its financial instruments and/or derivative instruments including associated collateral. For the Duke Energy Registrants, the revised disclosure guidance is effective on a retrospective basis for interim and annual periods beginning January 1, 2013. Other than additional disclosures, this revised guidance does not impact the consolidated results of operations, cash flows or financial position of Duke Energy.
SUBSEQUENT EVENTS
For information on subsequent events related to acquisitions and sales of other assets, regulatory matters, commitments and contingencies, and earnings per share see Notes 2, 4, 5 and 12, respectively, to the Unaudited Condensed Consolidated Financial Statements.
Statements, “Subsequent Events,” for a discussion of subsequent events.
90130
PART III
ITEM 6. EXHIBITS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have beenDuring the six months ended June 30, 2013, there were no significantmaterial changes from the disclosures presented into Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2011.disclosures about market risk. For an in-depth discussion of Duke Energy’s market risks, see “Management’s Discussion and Analysis of Quantitative and Qualitative Disclosures about Market Risk” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2011.
2012.
ITEM 4. CONTROLS AND PROCEDURES.PROCEDURES – DUKE ENERGY, DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA, DUKE ENERGY OHIO AND DUKE ENERGY INDIANA
DISCLOSURE CONTROLS AND PROCEDURESDisclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized, and reported, within the time periods specified by the Securities and Exchange Commission’s (SEC) rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated theirthe effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e)13a−15(e) and 15d-15(e)15d−15(e) under the Exchange Act) as of June 30, 2012,2013, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTINGChanges in Internal Control over Financial Reporting
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 20122013 and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
On July 2, 2012,During the previously announced merger betweensecond quarter of 2013, Duke Energy and Progress Energy closed. Duke Energy is currently in the process of integrating Progress’s operations andannounced that James E. Rogers will be conducting control reviews pursuant to Section 404retire, effective December 31, 2013. Mr. Rogers will remain Chairman of the Sarbanes-Oxley ActBoard of 2002. See Note 2Directors until his retirement. Lynn J. Good, previous Chief Financial Officer, was appointed as President and Chief Executive Officer and Vice Chair of the “Notes toBoard of Directors. On August 6, 2013, Steven K. Young was appointed Executive Vice President and Chief Financial Officer. Mr. Young will also retain the Condensed Consolidated Financial Statements” in “Item 1 Financial Statements” for additional information relating to the merger.title of Chief Accounting Officer and Controller until a replacement is announced.
91131
PART III
Exhibit | Duke Energy | Duke Energy | Progress Energy | Duke Energy Progress | Duke Energy Florida | Duke Energy Ohio | Duke Energy |
ITEM 1. LEGAL PROCEEDINGS.PROCEEDINGS
Avian Mortalities
Duke Energy has been notified by the U.S. Department of Justice (DOJ) that it has initiated a preliminary investigation into the incidental deaths of golden eagles and other migratory birds resulting from turbine collisions at two of Duke Energy’s wind farms in Wyoming. Duke Energy undertakes adaptive management practices designed to avoid and minimize additional avian impacts, and is cooperating in the investigation and working with both the DOJ and the US Fish and Wildlife Service toward a constructive resolution.
Ash Basin Enforcement Cases
Environmental organizations have sent notices of intent to sue to Duke Energy Carolinas and Duke Energy Progress related to alleged groundwater violations and Clean Water Act violations from coal ash ponds at three of their 14 coal-fired power plants in North Carolina. The North Carolina Division of Water Quality (DWQ) filed complaints alleging similar violations at two of the three plants. The environmental organizations have moved to intervene in the DWQ enforcement suits. The court has not yet ruled on these motions. DWQ, Duke Energy Carolinas, and Duke Energy Progress are negotiating a Consent Decree which was noticed for a 30-day comment period on July 15, 2013. The draft Consent Decree proposes both civil penalties (approximately $100,000 in the aggregate) and injunctive relief related to identifying and characterizing the alleged surface water and groundwater exceedances and taking measures to stop the violations or to permit them. One environmental organization has also filed a separate citizen suit in federal court.
Additional complaints related to other ash ponds owned by Duke Energy Carolinas and Duke Energy Progress could be filed.
For further information regarding legal proceedings, that became reportable events or in which there were material developments in the second quarter of 2012,including regulatory and environmental matters, see Note 4 to the Unaudited Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 5 to the Unaudited Condensed Consolidated Financial Statements, “Commitments and Contingencies” under the heading “Litigation.Contingencies — Litigation” and “Commitments and Contingencies — Environmental.”
ITEM 1A. RISK FACTORS.FACTORS
Please see below an update to risk factors affecting Duke Energy’s business in addition to those presented in our Annual Report on Form 10-K, Part I, Item 1A, for the year ended December 31, 2011. Except for the update below, there have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2011. For further detailed information regarding the risk factor below, refer to the Progress Energy Second Quarter 2012 Form 10-Q.
The scope of necessary repairs of the delamination of Progress Energy Florida’s Crystal River Unit 3 could prove more extensive than is currently identified, such repairs could prove not to be feasible resulting in early retirement of the unit, the costs of repair and/or replacement power could exceed estimates and insurance coverage or may not be recoverable through the regulatory process; the occurrence of any of which could adversely affect Duke Energy’s and Progress Energy Florida’s financial condition, results of operations and cash flows.
In September 2009, Crystal River Unit 3 began an outage for normal refueling and maintenance as well as an uprate project to increase its generating capability and to replace two steam generators. During preparations to replace the steam generators, workers discovered a delamination (or separation) within the concrete at the periphery of the containment building, which resulted in an extension of the outage. After analysis, Progress Energy Florida determined that the concrete delamination was caused by redistribution of stresses in the containment wall that occurred when Progress Energy Florida engineers created an opening to accommodate the replacement of the unit’s steam generators.
In March 2011, the work to return the plant to service was suspended after monitoring equipment at the repair site identified a new delamination that occurred in a different section of the outer wall after the repair work was completed and during the late stages of retensioning the containment building. Subsequent to March 2011, monitoring equipment has detected additional changes and further damage in the partially tensioned containment building and additional cracking or delaminations could occur during the repair process. Crystal River Unit 3 has remained out of service while Progress Energy Florida conducted an engineering analysis and review of the new delamination and evaluated repair options.
In June 2011, Progress Energy Florida notified the NRC and the FPSC that it plans to repair the Crystal River Unit 3 containment structure and estimates the unit will return to service in 2014. The repair option selected entails systematically removing and replacing concrete in substantial portions of the containment structure walls. The preliminary estimate of $900 million to $1.3 billion, as filed with the FPSC on June 27, 2011, is currently under review and could change following completion of further detailed engineering studies, vendor negotiations and final risk assessments. These engineering studies and risk assessments include analyses by independent entities currently in progress. The risk assessment process includes analysis of events that, although currently deemed unlikely, could have a significant impact on the cost estimate or feasibility of repair. The cost range of the repair option, based on preliminary analysis, appears to be trending upward. Progress Energy Florida believes the actions taken and costs incurred in response to the Crystal River Unit 3 delamination have been prudent and, accordingly, believe that replacement power and repair costs not recoverable through insurance to be recoverable through Progress Energy Florida’s fuel cost-recovery clause or base rates.
Additionally, as of result of the potential repair challenges, the unit could be forced to be retired early. Early retirement could result in continued purchases of replacement power, additional capital and operating costs associated with construction of replacement capacity resources, and impairments of unrecoverable portions of the retired plant.
While the foregoing reflects Progress Energy Florida’s current intentions and estimates with respect to Crystal River Unit 3, the costs, timing and feasibility of additional repairs to Crystal River Unit 3, the cost of replacement power, and the degree of recoverability of these costs, are all subject to significant uncertainties. Additional developments with respect to the condition of the Crystal River Unit 3 structures, costs that are greater than anticipated, recoverability that is less than anticipated and/or the inability to return Crystal River Unit 3 to service all could adversely affect Duke Energy’s and Progress Energy Florida’s financial condition, results of operations and cash flows.
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in Duke Energy’s,the Duke Energy Carolinas’, Duke Energy Ohio’s and Duke Energy Indiana’sRegistrants’ Annual Report on Form 10-K for the year ended December 31, 2011,2012, which could materially affect the Duke Energy Registrants’ financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.PROCEEDS
ISSUERPURCHASES OF EQUITY SECURITIES FOR THE SECOND QUARTER of 2012OF 2013
There were no issuer purchases of equity securities during the second quarter of 2012.
2013.
ITEM 5. OTHER INFORMATION.132
Departure of Directors
On July 27, 2012, John D. Baker II and Theresa M. Stone, each directors of Duke Energy, resigned from the Board of Directors of Duke Energy (the “Board”), effective immediately. Mr. Baker, who has served as a Director of Duke Energy or its predecessor companies since 2009, was a member of the Board’s Compensation Committee and Regulatory Policy and Operations Committee. Ms. Stone, who has served as a Director of Duke Energy or its predecessor companies since 2005, was Chair of the Board’s Audit Committee and was a member of the Finance & Risk Management Committee.
Based on Mr. Baker’s and Ms. Stone’s resignation letters, it is Duke Energy’s understanding that they determined to resign, in part, due to the Board’s actions on July 2, 2012 regarding the decision to make a change in the Chief Executive Officer of the Company.
Impact of Reverse Stock Split on Earnings Per Share
Immediately preceding the merger with Progress Energy on July 2, 2012, Duke Energy completed a one-for-three reverse stock split with respect to the issued and outstanding shares of Duke Energy common stock. The shareholders of Duke Energy approved the reverse stock split at Duke Energy’s special meeting of shareholders held on August 23, 2011.
92
PART II – OTHER INFORMATION
SIGNATURES
The table below includes the currently reported and previously reported earnings per share information for the three most recently completed fiscal years and the three months ended March 31, 2012. The currently reported information reflects retrospective adjustment of the effect of the one-for-three reverse stock split.
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| As Previously Reported | |||||||||
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| Average |
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(In millions, except per-share amounts) | Income |
| Shares |
| EPS |
| Shares |
| EPS | ||||||
Three Months Ended March 31, 2012 |
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Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic and diluted | $ | 292 |
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| 446 |
| $ | 0.66 |
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| 1,337 |
| $ | 0.22 | |
Year Ended December 31, 2011 |
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Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic | $ | 1,702 |
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| 444 |
| $ | 3.83 |
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| 1,332 |
| $ | 1.28 | |
Effect of dilutive securities: |
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Stock options, performance and restricted stock |
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| ― |
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| 1 |
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Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — diluted |
| 1,702 |
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| 444 |
| $ | 3.83 |
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| 1,333 |
| $ | 1.28 | |
Year Ended December 31, 2010 |
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Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic | $ | 1,315 |
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| 439 |
| $ | 2.99 |
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| 1,318 |
| $ | 1.00 | |
Effect of dilutive securities: |
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Stock options, performance and restricted stock |
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| 1 |
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| 1 |
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Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — diluted |
| 1,315 |
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| 440 |
| $ | 2.99 |
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| 1,319 |
| $ | 1.00 | |
Year Ended December 31, 2009 |
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Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — basic | $ | 1,061 |
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| 431 |
| $ | 2.46 |
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| 1,293 |
| $ | 0.82 | |
Effect of dilutive securities: |
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Stock options, performance and restricted stock |
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| ― |
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| 1 |
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Income from continuing operations attributable to Duke Energy common shareholders, as adjusted for participating securities — diluted |
| 1,061 |
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| 431 |
| $ | 2.46 |
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| 1,294 |
| $ | 0.82 |
93
PART II – OTHER INFORMATION
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Exhibit Number |
| Duke Energy |
| Duke Energy Carolinas |
| Progress Energy | Duke Energy Progress | Duke Energy Florida | Duke Energy Ohio |
| Duke Energy Indiana | ||||||||||||||||||||||||||||
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**10.1 | Employment Agreement between Duke Energy Corporation and Lynn J. Good dated June 17, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K of Duke Energy Corporation, File No. 1-32853 dated June 18, 2013). | X | |||||||||||||||||||||||||||||||||||||
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*12 | Computation of Ratio of Earnings to Fixed Charges | X |
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* | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X |
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* | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*31.1.3 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*31.1.4 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*31.1.5 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*31.1.6 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*31.1.7 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*31.2.1 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X |
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* | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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* | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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* | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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| X | |||||||||||||||||||||||||||||||
* | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*31.2.6 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*31.2.7 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*32.1.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X |
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* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*32.1.3 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*32.1.4 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*32.1.5 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*32.1.6 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*32.1.7 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*32.2.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X |
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* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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*32.2.6 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*32.2.7 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||||||||||||||||||||||||||||
*101.INS | XBRL Instance Document | X | X | X | X |
| X |
| X |
| X | ||||||||||||||||||||||||||||
*101.SCH | XBRL Taxonomy Extension Schema Document | X |
| X |
| X |
| X | X | X | X | ||||||||||||||||||||||||||||
*101.CAL | XBRL Taxonomy Calculation Linkbase Document | X | X | X | X |
| X |
| X |
| X | ||||||||||||||||||||||||||||
*101.LAB | XBRL Taxonomy Label Linkbase Document | X |
| X |
| X |
| X | X | X | X | ||||||||||||||||||||||||||||
*101.PRE | XBRL Taxonomy Presentation Linkbase Document | X | X | X | X |
| X |
| X |
| X | ||||||||||||||||||||||||||||
*101.DEF | XBRL Taxonomy Definition Linkbase Document | X |
| X |
| X |
| X | X | X | X | ||||||||||||||||||||||||||||
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The total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt | |||||||||||||||||||||||||||||||||||||||
not filed as an exhibit does not exceed | |||||||||||||||||||||||||||||||||||||||
registrant agrees, upon request of the Securities and Exchange Commission (SEC), to furnish copies of any or all of such instruments to it. | |||||||||||||||||||||||||||||||||||||||
94133
PART II
SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
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| DUKE ENERGY CORPORATION |
Date: August 8, 2013 | /S/ LYNN J. GOOD |
Lynn J. Good Vice Chairman, President and Chief Executive Officer | |
Date: August 8, 2013 | /S/ STEVEN K. YOUNG |
Steven K. Young Executive Vice President, Chief Financial Officer, Chief Accounting Officer, and Controller |
135
PART II
SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, INC. DUKE ENERGY FLORIDA, INC. DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, INC. | |
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Date: August 8, | /S/ LYNN J. GOOD
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| Lynn J. Good
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Date: August 8, | /S/ STEVEN K. YOUNG
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| Steven K. Young Executive Vice President, Chief Financial Officer, Chief Accounting Officer, and Controller |
95136