Duke Energy Corporation (holding Company) · NYSE:DUK
Duke Energy Corporation (holding Company) — Corporate Update (December 2001)
22 slides from Duke Energy Corporation (holding Company)'s corporate update, Dec 18, 2001
Slide 1: Monthly Chat, December 18, 2001
we generate what’s next sm Monthly Chat December 18, 2001 Richard Osborne Executive Vice President and Chief Risk Officer David Hauser Senior Vice President and Treasurer
Slide 2: Today's Topics
Today’s Topics ● ● Financial strength and liquidity ● Risk management expertise ●
Slide 3: Financial Strength
we generate what’s next sm Financial Strength David Hauser Senior Vice President and Treasurer
Slide 4: Key Financial Targets
Key Financial Targets ● ● Earnings per Share ◆ Targeting 10-15% cumulative annual growth over a ◆ base of $2.10 in 2000 ◆ Expect to exceed this target in 2001 and expect to be ◆ at the high end of this range in 2002 ● ● Capital Funding ◆ Total of $6-8 billion per year, including approximately ◆ $1.5
Slide 5: Diverse Energy Asset Base Underpinned by Strong Cash Flow
Diverse Energy Asset Base Underpinned by Strong Cash Flow Field Services Pipelines ● ● Consistent cash flows from franchised electric and gas transmission businesses Gas Generation ● ● Westcoast acquisition adds lower risk asset base while retaining Power Distribution strong earnings potential
Slide 6: Strong Commitment to “A” Credit Ratings
Strong Commitment to “A” Credit Ratings ● ● Demonstrated commitment through common equity Duke Energy Duke Capital transactions in 2001 FRMB: AA-/Aa3/AA- Sr Notes: A+ / A1 / A+ Sr Notes: A / A3 / A CP: A-1 / P-1 / F1+ CP: A-1 / P-2 / F1 ● ● Historical legacy of ratings commitment over past two decad
Slide 7: Industry Credit Ratings
Industry Credit Ratings Moody’s Credit Ratings Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Investment Baa3 Grade Ba1 Ba2 Ba3 B1 B2 B3 Ca DUK AES CPN DYN ENE MIR AEP REI TXU NRG WMB Note: The previous version of this slide included erroneous information for Dynegy and TXU. The information above has been verified
Slide 8: Effective Use of Capital
Effective Use of Capital Average Returns on Equity 20 % for Competitor Spectrum Duke Energy (A+) Energy Merchants (BBB- Average) 15 % Pipelines (BBB+ Average) Integrated Electrics 10 % (A- Average) 5% 1997 1998 1999 2000 Integrated Electrics include: AEP, D, EXC, PEG, REI, SO, TXU Energy Merchants i
Slide 9: Balance Sheet Strength
Balance Sheet Strength Balanced capitalization program provides financial flexibility and supports long-term growth As of September 30, 2001 US$ in millions Actual Percent Adjusted (2)(2) Percent Short-term Debt $ 951 3% $ 201 1% Long-term Debt (1)(1) 11,502 38% 11,502 38% Equity Units 875 3% 1,625
Slide 10: Equity Transactions for 2001
Equity Transactions for 2001 Common Equity Equity Units March March November Shares/Units 28.75 million 35 million 30 million Share/Ref Price $38.98 $38.98 $40.125 Yield n/a 8.25% 8.00% Premium n/a 22.0% 18.5% Maturity n/a May 2004 Nov 2004 Gross Proceeds $1.1 billion $875 million $750 million
Slide 11: Liquidity: Broad and Deep
Liquidity: Broad and Deep Duke Duke Energy Energy Duke Duke Capital Capital CP CP Program Program $1,250 $1,250 million million $1,550 $1,550 million million Avg Avg 2001 2001 Balance Balance $1,050 $1,050 million million $625 $625 million million LOC LOC Facility Facility n/a n/a $1,075 $1,075 mill
Slide 12: Financial Strength
Financial Strength ● ● Strong Balance Sheet ● Deep Liquidity ● ● Transparent Financial Structure ● ● Executive Management Commitment to ● Retaining Financial Strength and Credit Ratings
Slide 13: Risk Management
we generate what’s next sm Risk Management Richard Osborne Executive Vice President and Chief Risk Officer
Slide 14: Risk Management
Risk Management POLICY COMMITTEE Richard Osborne, CRO MARKET RISK COMMITTEE Richard Osborne, CRO DENA Corporate Risk Information Systems Management - 22 Risk Management DEI Credit - 24 DEM DEFS Business Unit Middle Office - 97 TETCO
Slide 15: Safeguarding Assets Exposed to Commodity Price Risk
Safeguarding Assets Exposed to Commodity Price Risk ● Designed hedge program to mitigate Hedging Guidelines earnings volatility 100% ● Guidelines consider 80% term structure of the markets 60% ● Guidelines 40% influenced by mean reversion of markets 20% ● Hedge percentage 0% targets based on (2.0) (
Slide 16: Safeguarding Assets Exposed to Commodity Price Risk
Safeguarding Assets Exposed to Commodity Price Risk Current Hedges 100% 87% DENA DEFS 80% 66% 64% 60% 53% 49% 40% 23% 20% 0% 2002 2003 2004
Slide 17: Safeguarding Capital Committed to Trading and Marketing
Safeguarding Capital Committed to Trading and Marketing ● ● Daily Earnings at Risk (DER) - Value at Risk Metric used to estimate the maximum expected portfolio loss over the next day with a 95% confidence level ◆ YTD ◆ YTD 2001: 2001: NAWE NAWE has has averaged averaged less less than than $14 $14 m
Slide 18: Credit Risk Management - Objectives
Credit Risk Management - Objectives ● ● Establish standards for effective and efficient credit risk management, including organizational accountabilities, exposure calculations, credit procedures and information management ● ● Maximize risk-adjusted returns by maintaining credit exposures within acc
Slide 19: Credit Risk Management - Process
Credit Risk Management - Process ● ● Financial requirements for unsecured lines of credit ● Counterparty risk assessment ● ◆ Assignment ◆ Assignment of of credit credit limits limits using using corporate corporate credit credit model; model; agency agency senior senior unsecured unsecured debt debt
Slide 20: Credit Quality
Credit Quality Top 30 Trading Exposures November 30, 2001 AA AA AA- AA- AA AA+ AA+ 5% 5% 4% 4% 13% 13% 6% 6% AAA AAA 8% A- A- 8% 13% 13% Enron Enron 7% 7% Non-Rated, Non-Rated, BBB+ BBB+ Investment Investment Grade Grade 15% 15% 6% 6% BB+ BB+ BBB BBB 7% 7% 11% Non-Rated, Non-Rated, Below Below 11% I
Slide 21: What Differentiates Duke Energy?
What Differentiates Duke Energy? ● ● Disciplined business strategy ● ● Diversified portfolio of energy assets and positions ◆ Geographic location ◆ ◆ Multiple commodities ◆ ● ● Financial strength ● ● Risk management skills and expertise ● ● Strong track record of delivering long-term earnings growth
Slide 22: we generate what’s next sm
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