Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — FY2010 Earnings Presentation
58 slides from Duke Energy Corporation (Holding Company)'s earnings presentation, Feb 17, 2011
Slide 1: Fourth Quarter and Year End 2010 Earnings Review and Business Update
FOURTH QUARTER and YEAR END 2010 Earnings Review and Business Update February 17, 2011 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 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “may,” “will,” “anticipate,” “estimate,” “expect,” “project,
Slide 3: Safe Harbor (Cont'd)
SAFE HARBOR (CONT’D) ADDITIONAL INFORMATION ON THE MERGER AND WHERE TO FIND IT This document does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which s
Slide 4: 2010 Key Accomplishments
2010 KEY ACCOMPLISHMENTS Growth in Earnings and Dividends Adjusted Diluted EPS Adjusted diluted EPS of $1.43, a 17% increase over 2009 $1.43 $1.22 Increased quarterly dividend per share to $0.245 Exceptional Operational Performance $0.28 $0.21 Set record Nuclear fleet capacity factor and M
Slide 5: Status of Major Construction Projects (as of 12/31/2010)
STATUS OF MAJOR CONSTRUCTION PROJECTS (AS OF 12/31/2010) Edwardsport – Indiana USFE&G Major Construction Projects1 • 618 MW IGCC facility • Expected in-service in 2012 $605 • Project is ~80% complete $750 • Cost increase pending before the IURC Cliffside – Carolinas $2,275 $1,650 • 825 MW advanced c
Slide 6: Update on Edwardsport Project
UPDATE ON EDWARDSPORT PROJECT Edwardsport Project Benefits Proposed IGCC-4S1 Procedural Schedule Date Capacity is needed to meet the long-term Duke supplemental testimony due February 21st demand of our customers Intervenors’ testimony due March 31st First base-load coal plant built by Duke Ener
Slide 7: Duke Energy Ohio Update
DUKE ENERGY OHIO UPDATE Customer Switching Market Rate Offer (MRO) Filing Switching levels have stabilized In November, DE-Ohio filed an MRO application to replace its ESP, which expires the end of this year As of December 31, 2010 MRO viewed as the best option to position DE-Ohio ~65% gross
Slide 8: 2011 Earnings Outlook
2011 EARNINGS OUTLOOK 2011 Adjusted Diluted EPS Outlook Range $1.35 – $1.40 6% EPS CAGR $1.40 Includes impact of $1.35 – weather (net of incentives above target) of $0.13 $1.40 4% EPS CAGR $1.30 $1.43 $1.20 $1.22 $1.10 2009A 2010A 2011E 8 Fourth Quarter and Year End Earnings Review and Business Upda
Slide 9: 2010 Financial Highlights
2010 FINANCIAL HIGHLIGHTS Adjusted Diluted EPS Adjusted Segment EBIT (in millions) 2010 Plan 2010 Actual $1.43 US Franchised Electric and Gas $ 2,630 $ 2,966 $1.22 Commercial Power 315 398 $0.28 International 485 486 $0.21 Total Business Segments $ 3,430 $ 3,850 2009 2010 2009 2010 Other (255) (278)
Slide 10: 2011 Adjusted Earnings Drivers
2011 ADJUSTED EARNINGS DRIVERS* $0.09 $0.14 $1.35 – $0.13 $0.03 $0.04 $1.40 $0.03 $1.43 $1.30 2010 Weather (net of 2010 Adjusted USFE&G Commercial International Interest Other 2011E Adjusted EPS incentives) EPS - Normalized EBIT Power EBIT EBIT Expense, net Adjusted EPS Key Assumptions USFE&G Commer
Slide 11: Duke's Capital Expenditures Profile
DUKE’S CAPITAL EXPENDITURES PROFILE ($ in millions) $4,450 - $5,000 $550 $3,600 – $4,300 $3,500 – $4,300 $550 $700 $800 Duke Energy $400 $300 Discretionary Commercial Businesses & Other $3,900 US FE&G $3,200 $3,200 2011 2012 2013 U.S. FE&G 9% 8% 16% System Growth 9% 23% Maintenance & Other 45% 12% 5
Slide 12: Frequent Rate Case Activity to Recover Costs
FREQUENT RATE CASE ACTIVITY TO RECOVER COSTS Jurisdiction 2011 2012 2013 File Mid-2011 File Mid-2012 North Carolina Historical Test Period Historical Test Period File Mid-2011 File Mid-2012 South Carolina Historical Test Period Historical Test Period Indiana File Early 2012 Historical Test Period Fi
Slide 13: 2011 Summary Cash Flows
2011 SUMMARY CASH FLOWS ($ in Millions) 2011E Primary Sources: Adjusted Net Income (1) $ 1,825 Expected 2011 Financing Plan Depreciation & Amortization 2,000 Deferred and Accrued Taxes 910 Estimated Debt Scheduled Debt ($ in Millions) (3) (4) Other Sources / (Uses), net (2) (600) Issuances Maturitie
Slide 14: Strategic Combination with Progress Energy
STRATEGIC COMBINATION WITH PROGRESS ENERGY Creates largest U.S. utility Strategic Benefits Substantial, diversified regulated business mix Unmatched financial and operational scale Earnings accretive in year one1 Investor Long-term earnings growth target of 4-6 percent1 Benefits Maintain Duke
Slide 15: Status of Merger Approvals
STATUS OF MERGER APPROVALS Progress on Filed Approved Key Milestones By end of 1Q 2011, file initial S-4 with SEC Shareholder Shareholder meeting in 2Q/3Q 2011 Department of Justice By end of 2Q 2011, file for Hart Scott Rodino review (DOJ) Federal Communications By end of 2Q 2011, file for
Slide 16: Key Priorities for 2011
KEY PRIORITIES FOR 2011 Overall US Franchised Electric & Gas Commercial Businesses • Obtain merger approvals • Obtain constructive regulatory • Achieve a constructive and finalize integration outcomes outcome for the new Ohio planning SSO agreement • Advance legislative agenda • Continued operationa
Slide 17: Appendix
APPENDIX Item Slides 2011 Guidance Details 19 – 24 2010 Details 26 – 35 Environmental Information 37 – 38 Additional Financial Information 40 - 46 17 Fourth Quarter and Year End Earnings Review and Business Update February 17, 2011
Slide 18: 2011 Guidance Details
2011 GUIDANCE DETAILS 18 Fourth Quarter and Year End Earnings Review and Business Update February 17, 2011
Slide 19: Forecasted 2011 Adjusted EBIT Drivers, by Segment
FORECASTED 2011 ADJUSTED EBIT DRIVERS, BY SEGMENT USFE&G Adjusted EBIT Drivers – 2010 to 2011 Adjusted Segment EBIT (in millions) 2010A 2011E ▲ Increased earnings from ongoing modernization program US Franchised Electric and Gas $ 2,966 $ 2,995 ▲ Load growth of approximately 1 percent ▼ Higher opera
Slide 20: Capital Expenditure Profile
CAPITAL EXPENDITURE PROFILE ($ in Millions) 2011E 2012E 2013E Cumulative Edwardsport IGCC $ 550 $ 50 $ - $ 600 Cliffside 250 100 - 350 CC / CT Additions - Carolinas 450 200 25 675 Smart Grid (1) 150 250 175 575 Environmental 50 250 500 800 Nuclear Fuel 350 275 375 1,000 Lee Nuclear 50 50 75 175 Cust
Slide 21: Select FE&G Capital Expenditures by Legal Entity
SELECT FE&G CAPITAL EXPENDITURES BY LEGAL ENTITY ($ in Millions) 2011E 2012E 2013E Cumulative Environmental Carolinas $ 20 $ 65 $ 150 $ 235 Indiana 30 175 340 545 Kentucky - 10 10 20 Total Environmental $ 50 $ 250 $ 500 $ 800 Customer Additions Carolinas $ 200 $ 250 $ 300 $ 750 Indiana 30 30 30 90 O
Slide 22: Rate Base and Regulatory Overview
RATE BASE AND REGULATORY OVERVIEW KY NC SC OH Electric (3) OH Gas IN Electric KY Gas Current Rate Base $13.7B (1) $1.3B $700MM $5.6B $600MM (6) $200 MM (6) Current Allowed ROE 10.7% 11.0% (2) 10.63% per NA per 10.50% NA per 10.375% settlement settlement settlement Current Equity in last 52.50% 53.00
Slide 23: Upcoming Regulatory Calendar – Key Filings
UPCOMING REGULATORY CALENDAR – KEY FILINGS IGCC CWIP Rider 5 & 6 – Indiana • Docket: 43114 – IGCC 5 and 43114 – IGCC 6 • Proposed Key Dates: • March 24th & 25th – Evidentiary hearings IGCC Cost Update – Indiana • Docket: 43114 – IGCC4S1 • Awaiting IURC order regarding procedural schedule • Proposed
Slide 24: Return on Equity
RETURN ON EQUITY 10.70% 10.50% 10.63% 10.375% 10.8% 10.8% 9.5%-10.0% 10.6% 9.25%- 9.75% 10.0%-10.5% 10.0% 9.7% 9.8% 9.5% 8.0%-8.5% 8.8% Carolinas (1) Indiana Ohio T&D (2) Kentucky (3) 2010A Reported 2010A 2010AAdjusted (4) 2011E 2011E Allowed Allowed Note: 2010 adjusted ROEs exclude Voluntary Opport
Slide 25: 2010 Details
2010 DETAILS 25 Fourth Quarter and Year End Earnings Review and Business Update February 17, 2011
Slide 26: 2010 Review of Key Financial Measures
2010 REVIEW OF KEY FINANCIAL MEASURES ($ in Millions) 2010 FY 2010A Assumptions USFE&G Adjusted Segment EBIT $2,630 $2,966 Commercial Power Adjusted Segment EBIT $315 $398 International Adjusted Segment EBIT $485 $486 Other Adjusted Net Expense $255 $278 Interest Expense $850 $840 Debt AFUDC and Cap
Slide 27: 4Q 2010 Earnings Summary and Drivers
4Q 2010 EARNINGS SUMMARY AND DRIVERS USFE&G Adjusted Segment EBIT Drivers – 4Q10 Adjusted Segment EBIT (in millions) 4Q10 4Q09 ▲ Increased revenues from ‘09 Carolinas rate cases – $70M US Franchised Electric and Gas $ 605 $ 548 ▲ Favorable weather – $46M ▲ Increased pricing and riders – $38M Commerc
Slide 28: US Franchised Electric and Gas
US FRANCHISED ELECTRIC AND GAS Reported & Adjusted Segment EBIT Full Year Full Year 4Q10 4Q09 ($ in Millions) 2010 2009 Reported Segment EBIT $ 605 $ 548 $ 2,966 $ 2,321 Adjustments -- -- -- -- Adjusted Segment EBIT $ 605 $ 548 $ 2,966 $ 2,321 Year-over-Year Drivers USFE&G Adjusted Segment EBIT Adju
Slide 29: Improvement in Normalized Volume Trends – USFE&G
IMPROVEMENT IN NORMALIZED VOLUME TRENDS – USFE&G Residential Commercial Change vs. Prior Year Quarter Change vs. Prior Year Quarter 1.5% <1% 0.9% <1% 0.1% 0.0% 0.0% 0.1% 0.0% -0.2% -0.9% -1.5% 1Q10 2Q10 3Q10 4Q10 YTD10 2011E 1Q10 2Q10 3Q10 4Q10 YTD10 2011E Industrial US FE&G Total Change vs. Prior Y
Slide 30: Industrial Volume Quarterly Trends
INDUSTRIAL VOLUME QUARTERLY TRENDS Primary Metals Textiles Billed GwH Billed GwH 2,000 1,500 1,500 1,000 1,000 Q1 Q2 Q3 Q1 Q2 Q3 Q3 Q4 Q4 Q3 Q4 Q1 Q2 Q3 Q4 500 Q4 Q1 Q2 Q3 Q4 Q1 Q2 500 Q1 Q2 - - 2008 2009 2010 2008 2009 2010 Chemicals Total Industrial Billed GwH Billed GwH 1,500 12,000 9,000 1,000 6
Slide 31: Maintain Focus on Operational Performance
MAINTAIN FOCUS ON OPERATIONAL PERFORMANCE Nuclear Generation Capacity Factor Fossil Generation Commercial Availability 100% 100% 90% 90% 80% 80% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Industry Average Duke Energy Duke Energy Nuclear Total Operating Cost – $/MWh Total Fossil Production Cos
Slide 32: USFE&G Quarterly Weather Impacts
USFE&G QUARTERLY WEATHER IMPACTS ($ in Millions) Weather EBIT to Normal: 2010 2009 First Quarter $ 60 $ 10 Second Quarter $ 80 $ 20 Third Quarter $ 120 $(40) Fourth Quarter $ 60 $ 10 Full Year $ 320 $ -- Note: Favorable/(Unfavorable) Key Weather Data (Full Year 2010) ►Cooling Degree Days (Full Year
Slide 33: Commercial Power
COMMERCIAL POWER Reported & Adjusted Segment EBIT Full Year Full Year 4Q10 4Q09 ($ in Millions) 2010 2009 Reported Segment EBIT $ 58 $ 68 $ (229) $ 27 Adjustments (4) 32 627 473 Adjusted Segment EBIT $ 54 $ 100 $ 398 $ 500 Year-over-Year Drivers Adjusted segment EBIT decreased primarily due to: (in
Slide 34: International
INTERNATIONAL Reported & Adjusted Segment EBIT Full Year Full Year 4Q10 4Q09 ($ in Millions) 2010 2009 Reported Segment EBIT $ 110 $ 104 $ 486 $ 365 Adjustments -- 18 -- 44 Adjusted Segment EBIT $ 110 $ 122 $ 486 $ 409 International Adjusted Segment (in millions) Year-over-Year Drivers EBIT Adjusted
Slide 35: Other
OTHER Reported & Adjusted Net Expense (Income) Full Year Full Year 4Q10 4Q09 ($ in Millions) 2010 2009 Reported Net Expense (Income) ($ 113) $ 58 $ 255 $ 251 Adjustments 234 (2) 23 (51) Adjusted Net Expense $ 121 $ 56 $ 278 $ 200 Year-over-Year Driver (in millions) Other Adjusted Net Expense Adjuste
Slide 36: Environmental Information
ENVIRONMENTAL INFORMATION 36 Fourth Quarter and Year End Earnings Review and Business Update February 17, 2011
Slide 37: Pending Environmental Regulations to Impact Coal Generation
PENDING ENVIRONMENTAL REGULATIONS TO IMPACT COAL GENERATION Proposed Regulations Future Regulations Coal Combustion Residuals (CCR) – “Coal Ash” Air Pollutants Regulation by EPA New rule proposed in June 2010 Utility boiler Maximum Achievable Control Technology (MACT) rule regulating Hazardous A
Slide 38: Coal Fleet Well Positioned for EPA Regulations
COAL FLEET WELL POSITIONED FOR EPA REGULATIONS Coal Generation Profile - Current Plans for Coal Generation Without Controls Retirement commitments associated with Cliffside Unit 6: Dan River, Cliffside 1-4, and certain Buck coal units of Carolinas Carolinas 3.5 GW 2.5 GW 1.7 GW ~600MW to be reti
Slide 39: Additional Financial Information
ADDITIONAL FINANCIAL INFORMATION 39 Fourth Quarter and Year End Earnings Review and Business Update February 17, 2011
Slide 40: Balance Sheet Strength
BALANCE SHEET STRENGTH Committed to current credit ratings Ratings have stable outlooks Plan maintains strong credit metrics in line with current ratings Strong liquidity and access to capital support our business plan Available liquidity of approximately $3.4 billion at year-end 2010 Un
Slide 41: Attractive Dividend Policy
ATTRACTIVE DIVIDEND POLICY Duke Energy dividend policy to be maintained Continued growth in dividend at a rate slower than growth of adjusted diluted EPS Targeting a long-term payout range of 65% to 70% of adjusted diluted EPS Attractive payout and yield underscores compelling shareholder va
Slide 42: Liquidity
LIQUIDITY Liquidity (as of December 31, 2010) ($ in millions) Duke DE DE DE DE Energy Carolinas Ohio Indiana Kentucky Total (1) Master Credit Facility $ 1,097 $ 840 $ 650 $ 450 $ 100 $ 3,137 (2) Regional Bank Credit Facility 100 100 - - - 200 Less: Notes Payable and Commercial Paper (3) - (300) - (1
Slide 43: Simplified Financing Structure (Dec. 31, 2010)
SIMPLIFIED FINANCING STRUCTURE (DEC. 31, 2010) Duke Energy Corporation Revolver Sublimit: $1.097 B LTD Outstanding: $2.85 B Total Consolidated LTD: $18.2 B (1) Duke Energy Carolinas DE International Revolver Sublimit: $840 M Cinergy Corp. LTD Outstanding: $0.75 B LTD Outstanding: $7.75 B Duke Energy
Slide 44: 2010 Financings Completed
2010 FINANCINGS COMPLETED ($ in millions) 2010 Fixed Rate Financings Date Issuer Security Amount March Duke Energy 3.35% Unsecured due 4/2015 $ 450 June DE Carolinas 4.30% FMB due 6/2020 450 Weighted July DE Indiana 3.75% FMB due 7/2020 500 Average $ 1,400 Rate of 2010 Project Financings 3.8% Date I
Slide 45: Long-Term Debt Maturities (2011 – 2013)
LONG-TERM DEBT MATURITIES (2011 – 2013) (1) ($ in millions) $ 1,800 $ 1,560 Other DE International DE Kentucky DE Indiana DE Ohio DE Carolinas $ 210 Duke Energy 2011 2012 2013 (1) Excludes securitized receivables liquidity facility maturity in 2012 (expected to be renewed). 45 Fourth Quarter and Yea
Slide 46: Credit Ratings Summary
CREDIT RATINGS SUMMARY Moody's S&P DUKE ENERGY Stable Stable Issuer Rating / Corporate Credit Rating Baa2 A- Senior Unsecured Baa2 BBB+ Commercial Paper P-2 A-2 DUKE ENERGY CAROLINAS Stable Stable Senior Secured A1 A Senior Unsecured A3 A- DUKE ENERGY OHIO Stable Stable Senior Secured A2 A Senior Un
Slide 47: Fourth Quarter and Year End Earnings Review and Business Update
47 Fourth Quarter and Year End Earnings Review and Business Update February 17, 2011 47
Slide 48: Duke Energy Corporation Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations 2010 Earnings Review & Business Update February 17, 2011 Adjusted Diluted Earnings per Share (“EPS”) The materials for Duke Energy Corporation’s (“Duke Energy”) 2010 Earnings Review and Business Update on February 17, 2011 include a discussion of adju
Slide 49: Adjusted Segment EBIT and Other Net Expenses definitions
financial measure is not available at this time, as management is unable to project special items or mark-to- market adjustments for future periods. Adjusted Segment EBIT and Other Net Expenses for 2009 and 2010 and Forecasted Adjusted Segment EBIT and Other Net Expenses for 2011 The materials for D
Slide 50: Ohio customer switching and EPS impact notes
providers, and approximately 60% of that switched customer load has been acquired by DERS, for a net switching percentage of approximately 26%. On average for 2011, Duke Energy forecasts that approximately 66% of customer load in Duke Energy Ohio’s Electric Security Plan territory will switch to alt
Slide 51: Adjusted to Reported Earnings Reconciliation – December 2010 Quarter-to-Date
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION December 2010 Quarter-to-Date (Dollars in millions, except per-share amounts) Special Items (Note 1) Voluntary Costs to Opportunity Economic Achieve, Plan/Office Hedges Adjusted Cinergy Consolidation (Mark-to- Discontinued Total Re
Slide 52: Adjusted to Reported Earnings Reconciliation – December 2010 Year-to-Date
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION December 2010 Year-to-Date (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 Hedges (Mar
Slide 53: Adjusted to Reported Earnings Reconciliation – December 2009 Quarter-to-Date
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION December 2009 Quarter-to-Date (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Economic Achieve, Hedges Adjusted Cinergy (Mark-to- Discontinued Total Reported Earnings Merger Impairments Market) * Ope
Slide 54: Adjusted to Reported Earnings Reconciliation – December 2009 Year-to-Date
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION December 2009 Year-to-Date (Dollars in millions, except per-share amounts) Special Items (Note 1) Crescent Costs to Related Achieve, Guarantees International Goodwill and Economic Adjusted Cinergy and Tax Transmission Other Hedges
Slide 55: Forecasted 2011 Diluted EPS Growth Excluding Favorable 2010 Weather Impacts
Duke Energy Corporation Forecasted 2011 Diluted Earnings Per Share ("EPS") Growth Excluding Favorable 2010 Weather Impacts 2010 Earnings Review and Business Update February 17, 2011 ($ in millions, except for per share amounts) (1) (1) (2) (2) (2) (3) (3) 2010 Weather 2011 Forecasted Total 2010 2010
Slide 56: 2011 Forecasted Cash Flow Reconciliation, Required by SEC Regulation G
Duke Energy Corporation 2011 Forecasted Cash Flow Reconciliation, Required by SEC Regulation G 2010 Earnings Review and Business Update February 17, 2011 ($ in millions) Forecast 2011 Primary Sources: Adjusted net income (1) (a) $ 1,825 Depreciation & amortization (a) 2,000 Deferred and accrued taxe
Slide 57: Available Liquidity Reconciliation as of December 31, 2010
Duke Energy Corporation Available Liquidity Reconciliation As of December 31, 2010 ($ in millions) Cash and Cash Equivalents $1,670 Less: Amounts Held in Foreign Jurisdictions (724) $946 Plus: Remaining Availability under Master Credit and Regional Bank Credit Facilities 2,482 Total Available Liquid
Slide 58: Operations and Maintenance Expense for the Years Ended December 31, 2010
Duke Energy Corporation Operations and Maintenance Expense For the Years Ended December 31, 2010 and 2009 ($ in millions) 2010 2009 Operation, maintenance and other (a) $ 3,825 $ 3,313 Transfers to capital (b) 108 149 Less: Voluntary Opportunity Plan/Office Consolidation Costs (c) (164) - Settlement