Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Duke Energy Analyst Conference 2003
18 slides from Duke Energy Corporation (Holding Company)'s conference presentation, May 30, 2003
Slide 1: Liquidity and Financing
Liquidity and Financing David Hauser Senior Vice President and Treasurer
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: Objectives
Objectives • Review our financing plan and debt reduction estimates • Discuss our current liquidity position • Provide an update on our credit ratings • Present management’s view on the forecasted credit metrics and financial flexibility at Duke Energy and Duke Capital 3
Slide 4: Financing Plan
Financing Plan • Reduce leverage in 2003 • Refinance some of our $1.3 billion of debt maturities and reduce the size of our commercial paper programs • Debt issuances Issued $500 million 3.75% 5-year First Mortgage Bonds Issued $200 million 4.50% 7-year First Mortgage Bonds Issued $770 million
Slide 5: Convertible Debt Transaction
Convertible Debt Transaction • On May 1, Duke Energy priced $700 million of 20 year senior convertible bonds. Subsequently, an additional $70 million was issued to cover over allotments. • Size: $770 million • Structure: Final maturity May 2023 Callable by company on or after May 2007 Investor p
Slide 6: Debt Reduction: Exceeding Forecasts (Duke Energy)
Debt Reduction: Exceeding Forecasts • By the end of 2005, Duke Duke Energy Consolidated Debt Energy will reduce its $25 outstanding debt and trust ($ in billions) preferred balances by $20 approximately $5.5 billion with $1.8 billion reduced in 2003. $15 • Duke Energy’s debt is about 55% 53% 47% 44%
Slide 7: Debt Reduction: Exceeding Forecasts (Duke Capital)
Debt Reduction: Exceeding Forecasts • By the end of 2005, Duke Duke Capital Consolidated Debt Capital will reduce its $25 outstanding debt and trust ($ in billions) preferred balances by $20 approximately $6.7 billion with $2.9 billion reduced in 2003. $15 • Duke Capital’s debt is $10 about $1.3 bil
Slide 8: 2004 Conversion of Equity Units
2004 Conversion of Equity Units With Without Remarketing Remarketing Debt Component of No Impact $1.6 billion Equity Units Other Debt (1) $1.6 billion No Impact Equity $1.6 billion $1.6 billion (1) Cash proceeds from successful remarketing of debt component of equity units gives the company the flex
Slide 9: Adjusted Capitalization Reflects Conversion of Equity Units
Adjusted Capitalization Reflects Conversion of Equity Units ($ in millions) 12/31/2002 Adjusted (2) Debt (1) $ 20,840 51% $ 20,840 51% Equity Units 1,625 4% -- -- Total Debt $ 22,465 55% $ 20,840 51% Trust Preferred Securities 1,408 3% 1,408 3% Preferred Stock (1) 159 -- 159 -- Minority Interests 1,
Slide 10: Financing Nodes
Financing Nodes Corporate credit ratings for corporate debt and/or CP Duke Energy Corporate credit rating for trading and marketing activities Duke Capital Other Duke Energy Gas Field Operations North America Transmission Services ◆ Duke Energy ◆ Texas Eastern ◆ Duke Energy Trading & Marketing Trans
Slide 11: Flexibility to Support DCC Debt Reductions Through Equity Infusions
Flexibility to Support DCC Debt Reductions Through Equity Infusions • Duke Energy Management has the obligation to assure that Duke Power supplies adequate, efficient and reliable electric service to customers at just and reasonable rates • In order to meet that obligation Duke Energy as a whole mus
Slide 12: Liquidity Position
Liquidity Position (as of May 22, 2003) Duke Duke Energy Capital Other * Credit Facilities $950 million $1.9 billion $1.5 billion LOC Facilities n/a $790 million n/a TOTAL CAPACITY $5.1 billion CP Outstanding $225 million $61 million $219 million LOC Outstanding n/a $765 million n/a Other Borrowings
Slide 13: Credit Facilities
Credit Facilities • Credit facility renewal proceeding according to plan • Size of credit facilities will be significantly reduced in conjunction with corporate needs • Key credit facility covenants Duke Energy – 65% Debt to Capitalization Duke Capital • 65% Debt to Capitalization • Adjusted EBI
Slide 14: Current Credit Ratings
Current Credit Ratings (as of May 22, 2003) S&P Moody’s (1) Fitch Duke Energy Negative Outlook Review for Downgrade Negative Outlook Senior Unsecured A- A3 A- Commercial Paper A-2 P-2 F2 Duke Capital Negative Outlook Review for Downgrade Negative Outlook Senior Unsecured BBB+ Baa2 BBB Commercial Pap
Slide 15: Improving Credit Metrics: Key Assumptions
Improving Credit Metrics: Key Assumptions • Funds from Operations (FFO) are challenging to calculate as net income is adjusted for many items by rating agencies such as deferred income taxes and Crescent’s operating cash flows • Debt component adjusted for items totaling approximately $6 billion in
Slide 16: 2003 – A Trough not a Trend: Debt Reductions Improve FFO Ratios
2003 – A Trough not a Trend: Debt Reductions Improve FFO Ratios Duke Energy Consolidated FFO Interest Coverage FFO / Average Debt 6 36% 5 24% 4 12% ’02 – ’05 average: 5.2x ’02 – ’05 average: 27% 3 0% 2002A 2003 2004 2005 2002A 2003 2004 2005 Duke Energy Corporation (A-/A3) S&P ratios for “A” range (
Slide 17: 2003 – A Trough not a Trend: Debt Reductions Improve FFO Ratios
2003 – A Trough not a Trend: Debt Reductions Improve FFO Ratios Duke Capital Consolidated FFO Interest Coverage FFO / Average Debt 6 36% 5 24% 4 12% 3 ’02 – ’05 average: 4.5x ’02 – ’05 average: 25% 2 0% 2002A 2003 2004 2005 2002A 2003 2004 2005 Duke Capital Corporation (BBB+/Baa2) S&P ratios for “BB
Slide 18: Summary
Summary • Duke Energy is delivering on its 2003-2005 financial plan and continues to take steps to enhance its financial strength • Financial markets have responded favorably to Duke Energy’s financial plan and execution in 2003 Successful credit syndications Successful issuance of $1.5 billion