Duke Energy Corporation (holding Company) · NYSE:DUK
Duke Energy Corporation (holding Company) — Duke Energy Analyst Conference 2003
15 slides from Duke Energy Corporation (holding Company)'s conference presentation, May 30, 2003
Slide 1: Duke Energy North America
Duke Energy North America Robert T. Ladd President
Slide 2: Disclosures
Disclosures Safe Harbor Statement Under the Private Securities Litigation Act of 1995 This document contains forward looking information which is subject to risks and uncertainties, including, but not limited to, changes in the utility regulatory environment, the impact of competition from other ene
Slide 3: Duke Energy North America
Duke Energy North America • Merchant energy business in North America • Own and operate approximately 14,200 MW of generation capacity • Control approximately 36.4 Bcf of gas storage and 3.4 Bcf/day of gas transportation • Trading and marketing business for power and natural gas • 1,100 employees 3
Slide 4: Key Business Lines
Duke Energy North America Key Business Lines Energy Generation Energy Management Energy Marketing • Operational management • Optimization of generation • Customized wholesale of generation fleet fleet capacity & portfolio transaction structuring & of bilateral positions management Focus on cost co
Slide 5: Energy Generation Physical Positions
Duke Energy North America Energy Generation Physical Positions Operational 2003 Construction Project Deferred McMahon Headquarters Grays Harbor Fort Francis Bayside Maine Independence Total Net Capacity MW Fayette Bridgeport Operating Lee Oakland Washington - Simple Cycle 4,471 Vermillion Moss Landi
Slide 6: Gas & Power Positions in the East & West
Duke Energy North America Gas & Power Positions in the East & West Power Hubs Operating Asset Under Construction Construction Deferred Gas Storage Alberta/BC Mid-C Sable Island NEPOOL Rockies Comed Eastern Portfolio PJM Generation 10,683 MW NP-15 Capacity Cinergy / AEP Gas SP-15 San 2.5 Bcf/d Transp
Slide 7: Business Strategy
Duke Energy North America Business Strategy Maximize the value of our portfolio of assets by focusing on: North American • Power • Gas Assets • Generation • Gas storage, supply & transportation Financial & operational discipline Customer service Culture consistent with that of Duke Energy
Slide 8: Aggressively Manage All Aspects of the Business
Aggressively Manage All Aspects of the Business • Reduction in size of business • Focus on key commodities • Collateral management • Reduction in overall trading risk • Financial and operational discipline 8
Slide 9: Discontinued Operations
Duke Energy North America Discontinued Operations Duke Energy North America is managing the exit of the following businesses: Business Rationalization • Proprietary Trading Risk management, collateral requirements • Ammonia Non-core business • Canadian Power Trading Lack of competitive advantage • C
Slide 10: Closing the EBIT Gap
Duke Energy North America Closing the EBIT Gap 2003 EBIT Forecast • Unhedged generation sales $200 MM • Optimization of generation Other Sources portfolio of Gross Margin $425 MM • Gas transportation & Net G&A storage ($210 MM) Plant O&M ($390 MM) • Ancillary Services Low-Risk • Reliability Must-Run
Slide 11: EBIT Projection
Duke Energy North America EBIT Projection ($ in millions) 1Q03 2Q - 4Q03 Total 2003 Total Gross Margin $ 193 $ 832 * $ 1,025 Total Operating Expenses (170) (655) (825) DENA Segment EBIT $ 23 $ 177 $ 200 * Includes $470 MM of low-risk gross margin 11
Slide 12: Stress Test – Change in Gross Margin
Stress Test – Change in Gross Margin ($ in millions) Low-Risk Gross Margin Variance, April - December 2003 Gas Prices +$2 7 8 9 High $270 $95 $(30) 4 5 6 Base Current $50 $270 Case 1 2 3 Low $20 $140 $650 -$1.25 Low Current High - $10 $15 Power Prices Gross Margin variance includes spark value and h
Slide 13: External Drivers
Market Reality External Drivers Merchant Boom (1998 – 2001) Regional Disparity (2002 – Present) Emphasis on trading Emphasis on customer Commoditization Individual customer solutions State-level regulatory & National deregulation political uncertainty Value from new generation Value optimization of
Slide 14: Internal Drivers
Market Reality Internal Drivers Growth Mode (1998 – 2001) Repositioning Mode (2002 – Present) Focus on volume metrics Focus on value to customer Growth mode, substantial overhead Recovery mode, cost reduction Complex business model Back-to-basics Individual goals & incentives Team goals & incentives
Slide 15: Summary
Duke Energy North America Summary • Addressing 6 Strategic Directives • Aggressive management of all aspects of business Reduction in size of business Focus on key commodities Collateral management Reduction in overall trading risk Financial and operational discipline Customer focused •