Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Debt Investor Presentation (April 2003)
22 slides from Duke Energy Corporation (Holding Company)'s debt investor presentation, April 2003
Slide 1: Monthly Chat
Monthly Chat David Hauser Senior Vice President and Treasurer April 2003
Slide 2: Objectives
Objectives Q Q Provide management’s view on the forecasted credit metrics and financial flexibility at Duke Energy and Duke Capital Q Q Update our cash flow expectations based upon current levels of asset sales, capex and associated debt reduction estimates 2
Slide 3: Introduction
Introduction Q Q In response to challenges in the energy markets and sluggish economy Duke Energy has made adjustments to its Business Plan: O O Generate positive net cash flow by selling non-strategic assets, reducing capex and streamlining costs O O Reduce balance sheet leverage by paying down deb
Slide 4: 2002 Financial Performance Summary
2002 Financial Performance Summary Q Q Although Duke Energy’s reported financial performance declined in 2002 from prior years’ results, cash generation and coverage ratios remained relatively strong DEC DCC Actual Actual Funds from Operations ($ in billions) $4.1 $2.6 FFO to Total Avg Debt 31.6% 29
Slide 5: Non-Strategic Asset Sales: Exceeding Expectations
Non-Strategic Asset Sales: Exceeding Expectations Q Q Approximately $1.1 billion in gross proceeds for non-strategic asset sales are announced or completed, surpassing original target Q Q Additional non-strategic asset divestitures expected to reach $1 billion in gross proceeds O O Approximately $40
Slide 6: 2003 Non-Strategic Asset Sales
2003 Non-Strategic Asset Sales ($ in millions) After-tax Annual Annual Gross Cash EBIT Operating Proceeds Proceeds Reduction Cash Announced/Closed Empire Pipeline $ 240 (1) American Ref-Fuel 306 Alliance/Aux Sable 245 Northern Border units 24 TEPPCO units 114 DCP loan monetization 198 Total $ 1,127
Slide 7: Capital Expenditures
Capital Expenditures $8 $7.3 Duke Energy Consolidated $6 Ventures and Other ($ in billions) DEI DENA $4 $3.0 Field Services $2.4 $2.4 Gas Transmission $2 Franchised Electric $0 2002A 2003 2004 2005 Note: 2002 includes $1.7 billion for the cash consideration paid for the Westcoast acquisition. 7
Slide 8: Debt Reduction: Exceeding Forecasts (Duke Energy)
Debt Reduction: Exceeding Forecasts By the end of 2005, Duke Energy will reduce its outstanding debt balance by approximately $5.5 billion with $1.8 billion reduction in 2003. Duke Energy Consolidated Debt $30 $20 ($ in billions) $10 55% 52% 46% 44% $0 2002 2003 2004 2005 Total Capitalization $40.9
Slide 9: Debt Reduction: Exceeding Forecasts (Duke Capital)
Debt Reduction: Exceeding Forecasts By the end of 2005, Duke Capital will reduce its outstanding debt balance by approximately $6.3 billion with $2.5 billion reduction in 2003. Duke Capital Consolidated Debt $21 $14 ($ in billions) $7 54% 49% 42% 38% $0 2002 2003 2004 2005 Total Capitalization $32.3
Slide 10: Debt Reduction Supported by Common Equity Transactions
Debt Reduction Supported by Common Equity Transactions ($ in millions) 2002 2003 2004 2005 Public offering $ 975 $ - $ - $ - Internal plans 348 250 250 250 Mandatory converts - - 1,625 - Total equity issues $ 1,323 $ 250 $ 1,875 $ 250 Equity infused to DCC $ 1,625 $ 450 $ 1,000 $ - Year-end equity a
Slide 11: Reducing Merchant Risk
Reducing Merchant Risk Q Q Key Issues O O Supply/demand imbalance O O Trading risks O O Collateral requirements Q Q Steps Taken O O Deferred 3 plants and completing construction of 1,860 MW in 2003, no plans for 2004 O O Discontinued proprietary trading O O Limiting maximum outgoing collateral requi
Slide 12: Collateral from Discontinued Operations
Collateral from Discontinued Operations Collateral Levels ($MMs) Projected Forward Months $1,000 12/3 1/31 2/28 3/31 Net Cash ($293) ($383) ($585) ($194) $500 LC's Out $ - ($ 75) ($ 75) $ - LC's In $ - $ - $ - $ - $0 -$500 -$1,000 3 2 3 2 3 3 2 3 2 3 2 3 2 2 3 3 3 2 2 3 3 r -0 y-0 y-0 n-0 n-0 n-0 l-
Slide 13: Liquidity Position
Liquidity Position (as of April 21, 2003) Duke Duke Energy Capital Other * Credit Facilities $950 million $1.9 billion $1.45 billion LOC Facilities n/a $790 million n/a TOTAL CAPACITY $5.1 billion CP Outstanding $450 million $475 million $300 million LOC Outstanding n/a $550 million n/a Other Borrow
Slide 14: Cash Flow Assumptions
Cash Flow Assumptions Q Q Net income is held flat at $1.4 billion for the three year period 2003 to 2005. Net income for 2004 and 2005 does not represent official company guidance but is used solely for the purposes of this discussion Q Q Net book value of non-strategic asset sales is expected to be
Slide 15: 2003 Cash Flow: Exceeding Expectations (Duke Energy)
2003 Cash Flow: Exceeding Expectations ($ Millions) Duke Energy Consolidated Primary Sources: 2003 2004 2005 Income (see note below) $ 1,400 $ 1,400 $ 1,400 Depreciation & amortization 1,900 2,100 2,200 NBV of ongoing Crescent inventory sales 500 400 450 NBV of non-strategic asset sales 1,300 600 --
Slide 16: 2003 Cash Flow: Exceeding Expectations (Duke Capital)
2003 Cash Flow: Exceeding Expectations ($ Millions) Duke Capital Consolidated Primary Sources: 2003 2004 2005 Income (see note below) $ 750 $ 750 $ 750 Depreciation & amortization 1,100 1,100 1,100 NBV of ongoing Crescent inventory sales 500 400 450 NBV of non-strategic asset sales 1,300 600 -- Defe
Slide 17: Improving Credit Metrics: Key Assumptions
Improving Credit Metrics: Key Assumptions Q Q 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 Q Q Debt component adjusted for items totaling approximately $6 billion
Slide 18: 2003 – A Trough not a Trend: Debt Reductions Improve FFO Ratios
2003 – A Trough not a Trend: Debt Reductions Improve FFO Ratios Duke Energy 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 (5) 18
Slide 19: 2003 – A Trough not a Trend: Debt Reductions Improve FFO Ratios
2003 – A Trough not a Trend: Debt Reductions Improve FFO Ratios Duke Capital 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 “BBB” range (6)
Slide 20: Financial Recap
Financial Recap Q Q 2003 2003 Expectations Expectations OO Expected Expected debt debt reduction reduction of of approximately approximately $1.8 $1.8 billion billion O O Announced Announced asset asset sales sales in in excess excess of of target, target, likely likely to to be be approximately app
Slide 21: Summary
Summary Q Q Balance sheet strengthened through significant debt reductions O O Committed to reducing outstanding debt by approximately $5.5 billion over the next 3 years O O Interest coverage ratios improve as debt decreases Q Q Additional flexibility for Duke Capital to receive equity support from
Slide 22: Monthly Chat
Monthly Chat Question and Answer Session April 2003
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