Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Q3 2010 Earnings Presentation
41 slides from Duke Energy Corporation (Holding Company)'s earnings presentation, Oct 28, 2010
Slide 1: Third Quarter Earnings Review and Business Update
THIRD QUARTER Earnings Review and Business Update October 28, 2010 Jim Rogers Chairman, President and Chief Executive Officer Lynn Good Group Executive and Chief Financial Officer
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT Some of the statements in this document concerning future company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and you should refer to the additiona
Slide 3: Increasing Full-Year Earnings Outlook
INCREASING FULL-YEAR EARNINGS OUTLOOK Adjusted Diluted EPS +30% 2010 Status Increasing earnings +28% outlook range to $1.22 $1.40 - $1.45 EPS* $0.94 $0.40 $0.51 Increase from previous range of $1.30 - $1.35 primarily due to favorable weather Q3 '09 Q3 '10 YTD '09 YTD '10 * Based on Adjusted Diluted
Slide 4: 3Q 2010 Earnings Summary and Drivers
3Q 2010 EARNINGS SUMMARY AND DRIVERS USFE&G Adjusted Segment EBIT Drivers Adjusted Segment EBIT (in millions) 3Q10 3Q09 ▲ Favorable weather – $157M US Franchised Electric and Gas (USFE&G) $ 946 $ 716 ▲ Increased revenues from ‘09 Carolinas rate cases – $90M ▲ Increased AFUDC equity – $20M Commercial
Slide 5: Volume Trends Continue to Be Favorable
VOLUME TRENDS CONTINUE TO BE FAVORABLE Improvement has been primarily led by industrials… …but sustainability remains uncertain Quarterly Volume Trends * Manufacturing (ISM Index) – Sustainable Improvement? 65 -12.3% 3Q09 60 -3.3% Expansion 55 -4.5% 4Q09 U.S. Index -1.5% 50 8.7% 45 1Q10 2.5% 40 Cont
Slide 6: Continued Focus on Cost Control Efforts
CONTINUED FOCUS ON COST CONTROL EFFORTS Adjusted YTD O&M Costs (1) 2010 Status ($ in millions) Thru Q3 2010, on-track to 2,600 achieve O&M costs(1) flat 2,500 $2.44 B $2.46 B to 2009 2,400 • Despite higher than expected generation levels, 2,300 O&M costs have remained flat as a result of 2,200 conti
Slide 7: Current ESP in Ohio Expires at End of 2011
CURRENT ESP IN OHIO EXPIRES AT END OF 2011 Duke Energy Ohio – Strategic Options Post-2011 Negotiated ESP ESP With Auction Market Rate Offer DE Ohio is evaluating strategic options - expect an initial filing by the end of the year Considerations post-2011 > Focused on improving returns and reduci
Slide 8: Update on Major Construction Projects
UPDATE ON MAJOR CONSTRUCTION PROJECTS Edwardsport – Indiana USFE&G Major Construction Projects1 • 618 MW IGCC facility expected in-service in 2012 • Project status (as of September 30, 2010) $855 • Overall project 74% complete $850 • Final engineering over 90% complete • Construction 52% complete $2
Slide 9: Our Commitments to Investors
OUR COMMITMENTS TO INVESTORS Commitments Short-Term Actions Long-Term Goals • Increasing 2010 adjusted diluted EPS range from • Achieve adjusted diluted EPS CAGR of 4-6% Grow Earnings $1.30 – $1.35 to $1.40 - $1.45 off a 2009 base and Dividends • Increased quarterly cash dividend by ½ cent/share • C
Slide 10: Appendix
APPENDIX Third Quarter Earnings Review and Business Update October 28, 2010
Slide 11: Update on Key Assumptions for 2010
UPDATE ON KEY ASSUMPTIONS FOR 2010 ($ in Millions) 2010 FY 2010 YTD Assumptions (thru 9/30/10) USFE&G Adjusted Segment EBIT $2,630 $2,361 Commercial Power Adjusted Segment EBIT $315 $344 International Adjusted Segment EBIT $485 $376 Other Adjusted Net Expense $255 $157 Interest Expense $850 $624 Deb
Slide 12: US Franchised Electric and Gas
US FRANCHISED ELECTRIC AND GAS Reported & Adjusted Segment EBIT 3Q10 3Q09 YTD 2010 YTD 2009 ($ in Millions) Reported Segment EBIT $ 946 $ 716 $ 2,361 $ 1,773 Adjustments -- -- -- -- Adjusted Segment EBIT $ 946 $ 716 $ 2,361 $ 1,773 USFE&G Adjusted Segment EBIT Quarter-over-Quarter Drivers (in millio
Slide 13: Summary of Edwardsport Settlement Agreement
SUMMARY OF EDWARDSPORT SETTLEMENT AGREEMENT Caps level of project costs Edwardsport Project Cost Summary to be passed on to ($ in Millions) Hard Cap customers at $2.975 Hard Cap - $2.975B billion Current Cost Estimate - $2.88B Soft Cap - $2.76B Rider authority raised to $735 $2.76 billion from $
Slide 14: Impacts of Edwardsport Settlement Agreement
IMPACTS OF EDWARDSPORT SETTLEMENT AGREEMENT Agreement lowers plant’s customer rate increase from Average Customer Rate Impact * overall average 19% to 16% in 2013 (first full year after the plant is in service) Equity return on costs between $2.35 billion to $2.975 billion (1.8%) Customer is red
Slide 15: Status of Environmental Controls on Coal Fleet
STATUS OF ENVIRONMENTAL CONTROLS ON COAL FLEET Coal Generation Profile - Current Plans for Coal Generation Without Controls Retirement commitments associated with Cliffside Unit 6: Dan River, legacy Cliffside, and certain Buck coal units of Carolinas Carolinas 3.5 GW 2.5 GW 1.7 GW ~600MW to be r
Slide 16: 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% 0.1% 1.7% 0.6% 0.1% 0.9% -0.9% -1.1% -0.9% -1.5% 3Q09 4Q09 1Q10 2Q10 3Q10 3Q09 4Q09 1Q10 2Q10 3Q10 Industrial USFE&G Total Change vs. Prior-Year Quarter Change vs.
Slide 17: 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 Q3 Q4 Q1 Q2 Q3 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 6,000 Q
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% Q110 Q210 Q310 Q410 Q110 Q210 Q310 Q410 2010 Year-End Target Actual 2010 Year-End Target Actual Nuclear Total Operating Cost – $/MWh Total Fossil P
Slide 19: USFE&G Quarterly Weather Impacts
USFE&G QUARTERLY WEATHER IMPACTS ($ in Millions) Weather EBIT to Normal: 2010 2009 First Quarter $ 60 $ 10 Second Quarter $ 80 $ 20 Third Quarter $ 120 $(40) Fourth Quarter $ 10 Full Year $ -- * Favorable/(Unfavorable) Key Weather Data (3Q2010) ►Carolinas experienced the hottest Q3 on record (dating
Slide 20: Upcoming Regulatory Calendar – Key Filings
UPCOMING REGULATORY CALENDAR – KEY FILINGS IGCC CWIP Rider 5 – Indiana • Docket: 43114 – IGCC 5 • Key Dates: • December 2nd – Evidentiary hearing IGCC Cost Update – Indiana • Docket: 43114 – IGCC4S • Key Dates: • November 19th – Duke rebuttal testimony due • November 29th and 30th – Hearings Smart G
Slide 21: Schedule of Upcoming Rate Case Activity
SCHEDULE OF UPCOMING RATE CASE ACTIVITY Planned Timing – Anticipated Timing – Jurisdiction Type Rate Filing * Rates Effective * North Carolina Electric 1H 2011 Early 2012 South Carolina Electric 1H 2011 Early 2012 Ohio Generation 4Q 2010 January 2012 Electric T&D Mid-2011 Mid-2012 Gas Distribution M
Slide 22: Commercial Power
COMMERCIAL POWER Reported & Adjusted Segment EBIT 3Q10 3Q09 YTD 2010 YTD 2009 ($ in Millions) Reported Segment EBIT $ 188 $ (234) $ (287) $ (41) Adjustments (33) 416 631 441 Adjusted Segment EBIT $ 155 $ 182 $ 344 $ 400 Quarter-over-Quarter Drivers (in millions) Commercial Power Adjusted Adjusted se
Slide 23: International
INTERNATIONAL Reported & Adjusted Segment EBIT ($ in Millions) 3Q10 3Q09 YTD 2010 YTD 2009 Reported Segment EBIT $ 110 $ 100 $ 376 $ 261 Adjustments -- -- -- 26 Adjusted Segment EBIT $ 110 $ 100 $ 376 $ 287 International Adjusted Segment (in millions) Quarter-over-Quarter Drivers EBIT Adjusted segme
Slide 24: Other
OTHER Reported & Adjusted Net Expense 3Q10 3Q09 YTD 2010 YTD 2009 ($ in Millions) Reported Net Expense $ 100 $ 65 $ 368 $ 193 Adjustments (53) (8) (211) (49) Adjusted Net Expense $ 47 $ 57 $ 157 $ 144 Other Adjusted Net Expense 2010 3Q Adjustments: (in millions) • $26 million litigation reserve $75
Slide 25: Pending Environmental Regulations to Impact Coal Generation
PENDING ENVIRONMENTAL REGULATIONS TO IMPACT COAL GENERATION Proposed Regulations Potential Regulations Coal Combustion Residuals (CCR) – “Coal Ash” Air Pollutants Regulation by EPA > New rule proposed in May 2010 > Maximum Achievable Control Technology (MACT) rule > Final rules expected in late 2011
Slide 26: Liquidity
LIQUIDITY Liquidity (as of September 30, 2010) ($ 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) - (
Slide 27: 2010 Financings Through September 30th
2010 FINANCINGS THROUGH SEPTEMBER 30th Long-Term Debt Financings ($ in millions) Date Issuer Security Amount March Duke Energy 3.35% Unsecured due 4/2015 $ 450 April Duke Energy Regional Bank Credit Facility Borrowing 75 May DEGS Green Frontier 15-year Term Loan (1) 325 May DEGS Blue Wing Solar 25-y
Slide 28: Increasing the Dividend
INCREASING THE DIVIDEND Indicative Annual Dividend Rate as of Year-end (Amounts in $ per share) $1.50 Spectra Energy $1.24 $1.28 Spin-Off Projected $1.10 $1.10 $1.10 $1.10 $1.10 $1.10 $0.92 $0.96 $0.98 $1.00 $0.88 $0.50 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E > June 2010 - in
Slide 29: Upcoming Activities
UPCOMING ACTIVITIES Event Date EEI Financial Conference October 31st – November 3rd Analyst Day/Fourth Quarter 2010 Earnings February 2011 29 Third Quarter Earnings Review and Business Update October 28, 2010
Slide 30: Third Quarter Earnings Review and Business Update October 28, 2010
Third Quarter Earnings Review and Business Update October 28, 2010 30
Slide 31: Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations Third Quarter Earnings Review and Business Update October 28, 2010 Adjusted Diluted Earnings per Share (“EPS”) The materials for Duke Energy Corporation’s (“Duke Energy”) Third Quarter Earnings Review and Business Update on October 28, 2010 include a
Slide 32: Adjusted Segment EBIT and Other Net Expenses
Adjusted Segment EBIT and Other Net Expenses for 2009 and 2010 and Forecasted Adjusted Segment EBIT and Other Net Expenses for 2010 The materials for Duke Energy’s Third Quarter Earnings Review and Business Update on October 28, 2010 include a discussion of adjusted segment EBIT and Other net expens
Slide 33: Ohio Customer Switching Impacts to Diluted EPS
Ohio Customer Switching Impacts to Diluted Earnings per Share The materials for Duke Energy’s Third Quarter Earnings Review and Business Update on October 28, 2010 include a discussion of the fact that the Midwest Generation component of the Commercial Power segment has had certain customers switch
Slide 34: Adjusted to Reported Earnings Reconciliation – Q3 2010
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION September 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 Litigation (Mark-to- Total Rep
Slide 35: Adjusted to Reported Earnings Reconciliation – YTD 2010
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION September 2010 Year-to-Date (Dollars in millions, except per-share amounts) Special Items (Note 1) Voluntary Costs to Opportunity Economic Achieve, Plan/Office Goodwill and Hedges Adjusted Cinergy Consolidation Other Litigation (Ma
Slide 36: Adjusted to Reported Earnings Reconciliation – Q3 2009
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION September 2009 Quarter-to-Date (Dollars in millions, except per-share amounts) Special Items (Note 1) Crescent Costs to Related Economic Achieve, Guarantees Goodwill and Hedges Adjusted Cinergy and Tax Other (Mark-to- Discontinued
Slide 37: Adjusted to Reported Earnings Reconciliation – YTD 2009
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION September 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 38: Adjusted to Reported Earnings Reconciliation – December 2009 YTD
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION December 2009 Year-to-Date (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Crescent Economic Achieve, Related International Goodwill and Hedges Adjusted Cinergy Guarantees and Transmission Other (Mar
Slide 39: Operations and Maintenance Expense
Duke Energy Corporation Operations and Maintenance Expense (In millions) Nine Months Ended September 30, 2010 September 30, 2009 Operation, maintenance and other (a) $ 2,724 $ 2,458 Transfers to capital (b) 120 79 Less: Voluntary Opportunity Plan/Office Consolidation Costs (c) (157) - International
Slide 40: Available Liquidity Reconciliation
Duke Energy Corporation Available Liquidity Reconciliation As of September 30, 2010 (In millions) Cash and Cash Equivalents $1,808 Less: Amounts Held in Foreign Jurisdictions (668) $1,140 Plus: Remaining Availability under Master Credit Facility 2,496 Total Available Liquidity as of September 30, 20
Slide 41: Diluted EPS Growth Excluding Favorable Weather Impacts
Duke Energy Corporation Diluted EPS Growth Excluding Favorable Weather Impacts Third Quarter 2010 Earnings Review and Business Update October 28, 2010 Q3 2010 Q3 2009 Franchised Electric & Gas (FE&G) - impact of favorable weather on segment EBIT (1) $120 ($40) Tax rate - FE&G operations 39% 39% Net