Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Q1 2012 Earnings Presentation
44 slides from Duke Energy Corporation (Holding Company)'s earnings presentation, May 4, 2012
Slide 1: First Quarter 2012 Earnings Review and Business Update
FIRST QUARTER 2012 Earnings Review and Business Update May 4, 2012 Jim Rogers Chairman, President and Chief Executive Officer Lynn Good Group Executive and Chief Financial Officer
Slide 2: Safe Harbor
SAFE HARBOR SAFE HARBOR STATEMENT 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-look
Slide 3: Safe Harbor (Cont'd)
SAFE HARBOR (Cont’d) REG G DISCLOSURE In addition, today's discussion includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is available on our Investor Relations website at www.duke-energy.com
Slide 4: Topics for Today's Call
TOPICS FOR TODAY’S CALL 1Q 2012 earnings review and financial update Regulated utility volume trends Coal-to-gas switching Business updates: Progress Energy merger FERC mitigation plan Major construction projects Edwardsport IGCC settlement agreement First Quarter Earnings Review and Bus
Slide 5: 1Q 2012 Earnings: Progress on Earnings Objectives
1Q 2012 EARNINGS: PROGRESS ON EARNINGS OBJECTIVES Adjusted Diluted EPS 2012 Status $0.39 $0.38 On-Track to Achieve $1.40 - $1.45 EPS* * Based on Adjusted Diluted EPS 1Q 2011 1Q 2012 Reported to Adjusted Reconciliation 1Q12 1Q11 Reported Diluted EPS $ 0.22 $ 0.38 Adjustments to Reported: Edwardsport
Slide 6: 1Q 2012 Earnings Summary and Drivers
1Q 2012 EARNINGS SUMMARY AND DRIVERS Adjusted Segment Income (in millions) 1Q12 1Q11 Primary Adjusted Segment Income Drivers – 1Q12 US Franchised Electric and Gas $ 344 $ 341 USFE&G +$3 million +$0.00 International 142 128 ▲Implementation of new Carolinas rates $0.03 ▲Riders and energy efficiency $0
Slide 7: USFE&G Weather-Normal Volume Trends
USFE&G WEATHER-NORMAL VOLUME TRENDS Q1 2012 weather-normalized load growth continues to remain soft Industrial load continues its recent strength Automotive, heavy machinery and chemical sectors remain strong Weakness persists with housing-related sectors and textiles in Carolinas Resident
Slide 8: Coal-to-Gas Switching
COAL-TO-GAS SWITCHING Generation Mix – USFE&G (1) Generation Mix – Midwest Generation (1) 11% Hydro 27% 36% 38% 41% 53% 41% Gas 62% Nuclear 73% 60% 59% 46% 47% Coal 2010A 2011A 2012E 2010A 2011A 2012E As a result of low natural gas prices: Coal-based generation levels are lower Natural gas-bas
Slide 9: FERC Mitigation Plan Summary
FERC MITIGATION PLAN SUMMARY On March 26, 2012, Duke Energy and Progress Energy filed a revised market power mitigation plan, a Joint Dispatch Agreement, and a Joint Open Access Transmission Tariff with the FERC The companies have requested that FERC issue orders approving these filings within 6
Slide 10: Edwardsport IGCC Settlement Agreement
EDWARDSPORT IGCC SETTLEMENT AGREEMENT Summary of Settlement On April 30, 2012, Duke Energy Indiana entered into a settlement agreement with the Indiana Office of Utility Consumer Counselor (OUCC), the Duke Energy Indiana Industrial Group and Nucor Steel-Indiana Settlement includes a cap on estim
Slide 11: Status of Major Construction Projects
STATUS OF MAJOR CONSTRUCTION PROJECTS (As of Mar. 31, 2012) Edwardsport – Indiana 99% Complete USFE&G Major Construction Projects1 $100 • 618 MW IGCC facility • Expected in-service by Fall 2012 • Successfully fired gas turbines in March $100 • Settlement pending before the IURC $3,200 $2,100 Cliffsi
Slide 12: Key Priorities
KEY PRIORITIES Shorter-Term (2012) Longer-Term (2012+) • Seek regulatory approvals related to the • Achieve 4% to 6% long-term adjusted diluted pending merger with Progress Energy EPS growth • Complete the remaining major capital • Maintain strength of balance sheet and credit projects ratings • Obt
Slide 13: Appendix Materials
APPENDIX MATERIALS Item Slides Update on Key 2012 Assumptions 14 Segment Results 15-22 Merger Scorecard 23 Environmental Information 24-27 Additional Financial Information 28-31 First Quarter Earnings Review and Business Update May 4, 2012 13
Slide 14: Update on Key Assumptions for 2012
UPDATE ON KEY ASSUMPTIONS FOR 2012 ($ in Millions) 2012 2012 YTD Assumptions (thru 3/31/12) Adjusted Segment Income: USFE&G $1,485 $344 Commercial Power $80 $30 International $410 $142 Other (1) ($70) ($10) Duke Energy Consolidated (2) $1,905 $506 Additional Consolidated Information: Interest Expens
Slide 15: Business Segment Structure
BUSINESS SEGMENT STRUCTURE DUKE ENERGY U.S. FRANCHISED ELECTRIC AND COMMERCIAL POWER INTERNATIONAL GAS Duke Energy North and South Duke Energy Carolina Renewables Carolinas Duke Energy Indiana Duke Energy Retail (DER) Indiana Ohio T&D Midwest Coal Generation Duke Energy Ohio Ohio Gas Midwest Gas Dis
Slide 16: US Franchised Electric and Gas
US FRANCHISED ELECTRIC AND GAS Reported & Adjusted Segment Income 1Q12 1Q11 ($ in Millions) Reported Segment Income $ 136 $ 341 Adjustments 208 -- Adjusted Segment Income $ 344 $ 341 USFE&G Adjusted Segment Income Quarter-over-Quarter Drivers (in millions) Adjusted segment income was flat primarily
Slide 17: Normalized Volume Trends – USFE&G
NORMALIZED VOLUME TRENDS – USFE&G Residential Commercial 1.6% Change vs. Prior Year Quarter Change vs. Prior Year Quarter 1.2% 0.3% 0.5% 1.0% 0.6% 0.2% -0.6% -0.4% -0.1% -0.7% -2.1% 1Q11 2Q11 3Q11 4Q11 1Q12 2012 Plan 1Q11 2Q11 3Q11 4Q11 1Q12 2012 Plan Industrial USFE&G Total Change vs. Prior Year Qu
Slide 18: Maintain Focus on Operational Performance
MAINTAIN FOCUS ON OPERATIONAL PERFORMANCE Nuclear Generation Capacity Factor Fossil Generation Commercial Availability 100% 100% 90% 90% 80% 80% 70% 70% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2012 Year-End Target Actual 2012 Year-End Target Actual Nuclear Total Operating Cost – $/MWh Total Fossil Production Costs
Slide 19: USFE&G Quarterly Weather Impacts
USFE&G QUARTERLY WEATHER IMPACTS (EPS Impact) Weather Segment Income to Normal: 2012 2011 First Quarter ($0.04) $ -- Second Quarter $0.03 Third Quarter $0.04 Fourth Quarter ($0.02) Year-to-Date ($0.04) $0.05 Note: Favorable/(Unfavorable); Amounts may not foot due to rounding Key Weather Data (1Q2012
Slide 20: International
INTERNATIONAL Reported & Adjusted Segment Income 1Q12 1Q11 ($ in Millions) Reported Segment Income $ 142 $ 128 Adjustments -- -- Adjusted Segment Income $ 142 $ 128 International Adjusted (in millions) Segment Income $175 Quarter-Over-Quarter Drivers Adjusted segment income increased primarily due t
Slide 21: Commercial Power
COMMERCIAL POWER Reported & Adjusted Net Income 1Q12 1Q11 ($ in Millions) Reported Segment Income $ 31 $ 49 Adjustments (1) 3 Adjusted Segment Income $ 30 $ 52 Quarter-Over-Quarter Drivers Commercial Power Adjusted Adjusted segment income decreased primarily due to: (in millions) Segment Income • -$
Slide 22: Other
OTHER Reported & Adjusted Income (Loss) 1Q12 1Q11 ($ in Millions) Reported Income (Loss) ($ 16) ($ 7) Adjustments 6 7 Adjusted Income (Loss) ($ 10) -- Other Adjusted Income (Loss) (in millions) $50 1Q 2012 Adjustments: $25 • $6 million - costs-to-achieve Progress Energy merger, net of tax $0 1Q 2011
Slide 23: Status of Merger Filings
STATUS OF MERGER FILINGS (As of May 4, 2012) Stakeholder Progress on Key Milestones Filed Approved Shareholder Received shareholder approvals on August 23, 2011 Department of Justice The parties have met their obligations under the Hart-Scott-Rodino Act (HSR) Waiting Period (DOJ) Expired F
Slide 24: Pending Environmental Regulations
PENDING ENVIRONMENTAL REGULATIONS Rule Overview Potential Impacts to Duke Energy Utility boiler Maximum Achievable Control Technology (MACT) rule Additional air emissions control Mercury and Air regulating Hazardous Air Pollutants (e.g., mercury & non-mercury HAPs) equipment Toxics Rule (MATS)
Slide 25: Pending EPA Regulations Will Impact U.S. Generation
PENDING EPA REGULATIONS WILL IMPACT U.S. GENERATION Major Regulations Duke Energy Domestic Generation Considerations for EPA Coal Combustion Coal Generation Profile Transition period must Residuals Rule TODAY – 16.0 GW (1) POST MODERNIZATION (2) – 14.6 GW be reasonable to allow (Coal Ash) utilities
Slide 26: Positioning Our Coal Fleet for EPA Regulations
POSITIONING OUR COAL FLEET FOR EPA REGULATIONS Coal Generation Profile - Current Plans for Coal Generation Without Controls Riverbend ~450MW potential to be retired by 2015 Carolinas Carolinas 3.4 GW 2.5 GW 1.1 GW Lee ~370MW potential to convert to gas or retire by 2015 ~7.0 GW Buck 5&6 ~260MW
Slide 27: Duke Energy Steam Facility Data
DUKE ENERGY STEAM FACILITY DATA Structure Operating State Jurisdiction Steam Unit Facility Owned Capacity (MW) Fuel Type Current Cooling Method Emissions Controls Regulated In Operation DE Carolinas Allen 1127 Coal Once-Through Scrubber Regulated In Operation DE Carolinas Belews Creek 2220 Coal Once
Slide 28: Long-Term Earnings Growth Drivers
LONG-TERM EARNINGS GROWTH DRIVERS Adjusted Long-Term Earnings Growth Primary Earnings Growth Drivers REGULATED BUSINESSES Includes weather Includes weather 6% EPS CAGR $1.50 impact (net of impact of $0.05 Investments in rate base incentives above target) of $0.13 Fleet and grid modernization $1.
Slide 29: Dividend Policy
DIVIDEND POLICY Duke Energy dividend policy DUK Annual Dividend Per Share History Continued growth in dividend at a rate slower than growth of adjusted diluted EPS $1.02 Targeting a long-term payout range of 65% $1.00 to 70% of adjusted diluted EPS $0.98 $0.96 Dividend supported by strong regula
Slide 30: Progress on 2012 Financing Plan
PROGRESS ON 2012 FINANCING PLAN (As of May 4, 2012) Financing Philosophy 2012 Financing Plan(1) ($ in millions) Utility operating subsidiary financings Duke Energy(2) $240 Index eligible financings with longer- Duke International $272 dated tenors Duke Renewables (3) $475 Utilize first mortgage b
Slide 31: Liquidity
LIQUIDITY Liquidity (as of March 31, 2012) ($ in millions) Duke DE DE DE DE Energy Carolinas Ohio Indiana Kentucky Total (1) Master Credit Facility $ 1,250 $ 1,250 $ 650 $ 750 $ 100 $ 4,000 (2) Regional Bank Credit Facility 100 100 - - - 200 Less: Notes Payable and Commercial Paper (3) (55) (300) -
Slide 32: First Quarter Earnings Review and Business Update
First Quarter Earnings Review and Business Update May 4, 2012 32 32
Slide 33: Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations First Quarter Earnings Review & Business Update May 4, 2012 Adjusted Diluted Earnings per Share (“EPS”) The materials for Duke Energy Corporation’s (“Duke Energy”) First Quarter Earnings Review and Business Update on May 4, 2012 include a discussion o
Slide 34: Non-GAAP Reconciliations (continued)
diluted EPS is reported diluted EPS from continuing operations attributable to Duke Energy Corporation common shareholders, which includes the impact of special items and the mark-to-market impacts of economic hedges in the Commercial Power segment. Due to the forward-looking nature of this non-GAAP
Slide 35: Adjusted Effective Tax Rate
Adjusted Effective Tax Rate The materials for Duke Energy’s First Quarter Earnings Review and Business Update on May 4, 2012 include a discussion of the adjusted effective tax rate (“ETR”) for the quarter ended March 31, 2012. Adjusted effective tax rate is a non-GAAP financial measure as the rate i
Slide 36: Adjusted to Reported Earnings Reconciliation – Three Months Ended March 31, 2012
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended March 31, 2012 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Voluntary Economic Adjusted Progress Opportunity Edwardsport Hedges (Mark- Discontinued Total Reported Earnings Merge
Slide 37: Adjusted to Reported Earnings Reconciliation – Three Months Ended March 31, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended March 31, 2011 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Economic Adjusted Progress Hedges (Mark- Total Reported Earnings Merger to-Market) * Adjustments Earnings SEGMENT INC
Slide 38: Adjusted to Reported Earnings Reconciliation – Three Months Ended June 30, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended June 30, 2011 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Adjusted Progress Total Reported Earnings Merger Adjustments Earnings SEGMENT INCOME U.S. Franchised Electric and Gas
Slide 39: Adjusted to Reported Earnings Reconciliation – Three Months Ended September 30, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended September 30, 2011 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Emission Economic Adjusted Progress Edwardsport Allowances Hedges (Mark- Discontinued Total Reported Earnings Mer
Slide 40: Adjusted to Reported Earnings Reconciliation – Three Months Ended December 31, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended December 31, 2011 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Economic Adjusted Progress Hedges (Mark- Total Reported Earnings Merger to-Market) * Adjustments Earnings SEGMENT
Slide 41: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended December 31, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2011 (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Achieve, Emission Economic Adjusted Progress Edwardsport Allowances Hedges (Mark- Discontinued Total Reported Ear
Slide 42: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended December 31, 2010
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2010 (Dollars in millions, except per-share amounts) Special Items (Note 1) Voluntary Costs to Opportunity Achieve, Plan/ Office Goodwill and Economic Adjusted Cinergy Consolidation Other Litigation
Slide 43: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended December 31, 2009
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2009 (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Economic Achieve, Crescent Related International Goodwill and Hedges Adjusted Cinergy Guarantees and Transmission
Slide 44: Available Liquidity Reconciliation
Duke Energy Corporation Available Liquidity Reconciliation As of March 31, 2012 (In millions) Cash and Cash Equivalents $1,071 Short-Term Investments 238 Subtotal 1,309 Less: Amounts Held in Foreign Jurisdictions (1,197) $112 Plus: Remaining Availability under Master Credit and Regional Bank Credit