Duke Energy Corporation (holding Company) · NYSE:DUK
Duke Energy Corporation (holding Company) — Q2 2011 Earnings Presentation
44 slides from Duke Energy Corporation (holding Company)'s earnings presentation, Aug 2, 2011
Slide 1: Second Quarter Earnings Review and Business Update
SECOND QUARTER Earnings Review and Business Update August 2, 2011 Jim Rogers Chairman, President and Chief Executive Officer Lynn Good Group Executive and Chief Financial Officer
Slide 2: Safe Harbor Statement
SAFE HARBOR SAFE HARBOR STATEMENT This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management's beliefs and assumptions. These forward-look
Slide 3: Safe Harbor (Cont'd)
SAFE HARBOR (CONT’D) REG G DISCLOSURE In addition, today's discussion includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is available on our Investor Relations website at www.duke-energy.com
Slide 4: Topics for Today's Call
TOPICS FOR TODAY’S CALL 2Q 2011 earnings review and financial update Status of merger filings Status of major construction projects ESP filing in Ohio North Carolina rate case Proposed EPA regulations Nuclear outlook Duke Energy’s key priorities Second Quarter Earnings Review and Bus
Slide 5: 2Q 2011 Earnings: Progress on Earnings Objectives
2Q 2011 EARNINGS: PROGRESS ON EARNINGS OBJECTIVES Adjusted Diluted EPS 2011 Status On-Track to Achieve $0.70 $0.72 $1.35 - $1.40 EPS* $0.34 $0.33 * Based on Adjusted Diluted EPS 2Q 2010 2Q 2011 YTD 2010 YTD 2011 Reported to Adjusted Reconciliation 2Q11 2Q10 Reported Diluted Income (Loss) per Share $
Slide 6: 2Q 2011 Earnings Summary and Drivers
2Q 2011 EARNINGS SUMMARY AND DRIVERS Adjusted Segment EBIT (in millions) 2Q11 2Q10 USFE&G Adjusted Segment EBIT Drivers – 2Q11 ▼ Increased O&M costs, primarily from storm restoration – ($80M) US Franchised Electric and Gas $ 619 $ 671 ▼ Less favorable weather – ($31M) ▲ Increased pricing and AFUDC,
Slide 7: Normalized Volume Trends – USFE&G
NORMALIZED VOLUME TRENDS – USFE&G Residential Commercial Change vs. Prior Year Quarter Change vs. Prior Year Quarter 1.6% <1% 0.9% <1% 0.1% 0.0% 0.1% -0.2% -0.4% -0.7% -1.5% -2.1% 2Q10 3Q10 4Q10 1Q11 2Q11 2011E 2Q10 3Q10 4Q10 1Q11 2Q11 2011E Industrial USFE&G Total Change vs. Prior Year Quarter Chan
Slide 8: Duke Energy Ohio Customer Switching Update
DUKE ENERGY OHIO CUSTOMER SWITCHING UPDATE DE Ohio Generation Providers Customer switching levels (based on customer load) remained stable during 2Q 2011 Stabilization As of June 30, 2011 16% 16% 18% 19% 20% 21% 23% 25% 26% 26% 26% 26% 26% 26% 27% 27% 27% 27% 28% ~67% gross switching 23% 24% 27%
Slide 9: Status of Merger Filings
STATUS OF MERGER FILINGS (As of August 2, 2011) Progress on Stakeholder Filed Approved Key Milestones S-4 declared effective by SEC on July 7, 2011 Declared Shareholder Joint proxy statement /prospectus mailed to shareholders beginning July 11, 2011 Effective Special shareholder meetings sch
Slide 10: Status of Major Construction Projects
STATUS OF MAJOR CONSTRUCTION PROJECTS (As of June 30, 2011) Edwardsport – Indiana 90% Complete USFE&G Major Construction Projects1 • 618 MW IGCC facility • Expected in-service in 2012 $180 • Cost increase pending before the IURC $550 Cliffside – Carolinas 88% Complete • 825 MW advanced clean-coal un
Slide 11: Duke Energy Ohio Proposed ESP Balances Stakeholder Objectives
DUKE ENERGY OHIO PROPOSED ESP BALANCES STAKEHOLDER OBJECTIVES Stakeholder Benefits of Proposed ESP CUSTOMERS Retain ability to choose energy providers ESP term of 9 years, 5 months Receive reasonable and stable pricing for an Mitigates future exposure to high market extended period prices Be
Slide 12: North Carolina Rate Case
NORTH CAROLINA RATE CASE Major Components of Filing Rate Case Drivers On July 1, Duke Energy Carolinas filed a rate case with the North Carolina Utilities Commission (NCUC) to request an average 15% increase in 15% retail revenues, or ~$646 million 11% The filing is premised upon the following: R
Slide 13: Cross-State Air Pollution Rule (CSAPR)
CROSS-STATE AIR POLLUTION RULE (CSAPR) In July, the EPA issued CSAPR, regulating emissions of SO2 and NOx Final rule is more stringent in many respects than the proposed Clean Air Transport Rule (CATR) Retained 2012 compliance deadline, but reduces the allocation of allowances and limits interst
Slide 14: Nuclear Outlook
NUCLEAR OUTLOOK NRC Task Force Review U.S. nuclear plants are continually upgraded to ensure safe operations (e.g., upgrades after 9/11) Immediately following the Fukushima crisis, we took action to reconfirm the availability of systems to mitigate extreme events Duke Energy will work collabor
Slide 15: Duke Energy's Key Priorities
DUKE ENERGY’S KEY PRIORITIES CURRENT ONGOING Merger approvals Cost control Constructive regulatory Achieve adjusted Operational outcomes earnings growth of excellence Progress on 4% − 6% Environmental modernization program Continue to grow compliance Constructive Ohio SSO the dividend
Slide 16: Appendix
APPENDIX Item Slides Update on Key 2011 Assumptions 17 Segment Results 18-26 Environmental Information 27-30 Additional Financial Information 31-33 Upcoming Activities 34 Second Quarter Earnings Review and Business Update August 2, 2011 16
Slide 17: Update on Key Assumptions for 2011
UPDATE ON KEY ASSUMPTIONS FOR 2011 ($ in Millions) 2011 FY 2011 YTD Assumptions (thru 6/30/11) USFE&G Adjusted Segment EBIT $2,995 $1,331 Commercial Power Adjusted Segment EBIT $215 $154 International Adjusted Segment EBIT $550 $359 Other Adjusted Net Expense $220 $86 Interest Expense $920 $422 Debt
Slide 18: US Franchised Electric and Gas
US FRANCHISED ELECTRIC AND GAS Reported & Adjusted Segment EBIT 2Q11 2Q10 YTD 2011 YTD 2010 ($ in Millions) Reported Segment EBIT $ 619 $ 671 $1,331 $1,415 Adjustments -- -- -- -- Adjusted Segment EBIT $ 619 $ 671 $1,331 $1,415 USFE&G Adjusted Segment EBIT (in millions) Quarter-over-Quarter Drivers
Slide 19: Key Regulatory Filings and Dates
KEY REGULATORY FILINGS AND DATES IGCC CWIP Riders – Indiana January 2009 Ice Storm Deferral Request – Indiana Docket: 43114-IGCC 5; 43114-IGCC 6; and 43114-IGCC 7 Docket: 43743 September 22 – Intervenors’ testimony due for IGCC 7 Hearings held June 9; awaiting IURC order October 13 – Duke
Slide 20: 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% 1Q11 2Q11 3Q11 4Q11 1Q11 2Q11 3Q11 4Q11 2011 Year-End Target Actual 2011 Year-End Target Actual Nuclear Total Operating Cost – $/MWh Total Fossil P
Slide 21: Industrial Volume Quarterly Trends
INDUSTRIAL VOLUME QUARTERLY TRENDS Primary Metals Textiles Billed GwH Billed GwH 2,000 1,500 1,500 1,000 1,000 08 08 08 08 08 10 11 10 11 08 09 10 500 09 10 11 09 10 08 09 10 500 09 09 08 09 10 09 10 11 - - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Chemicals Total Industrial Billed GwH Billed GwH 1,500 12,000 9,000 1
Slide 22: USFE&G Quarterly Weather Impacts
USFE&G QUARTERLY WEATHER IMPACTS ($ in Millions) Weather EBIT to Normal: 2011 2010 First Quarter $ -- $ 60 Second Quarter $ 50 $ 80 Third Quarter $120 Fourth Quarter $ 60 Year-to-Date $ 50 $320 Note: Favorable/(Unfavorable) Key Weather Data (2Q2011) ►Carolinas experienced the fifth warmest June on r
Slide 23: Commercial Power
COMMERCIAL POWER Reported & Adjusted Segment EBIT ($ in Millions) 2Q11 2Q10 YTD 2011 YTD 2010 Reported Segment EBIT $ 59 $ (604) $ 150 $ (475) Adjustments -- 693 4 664 Adjusted Segment EBIT $ 59 $ 89 $ 154 $ 189 Year-over-Year Drivers Commercial Power Adjusted Adjusted segment EBIT decreased primari
Slide 24: 2014/15 PJM Auction Results
2014/15 PJM AUCTION RESULTS Midwest gas-fired assets receiving auction price 3,500 $150 Capacity Price per MW-day $126 $110 $125 $100 3,000 $75 MW $50 $28 $16 $25 2,500 $- '11 / '12 '12 / '13 '13 / '14 14 / '15 Planning Year Auctions Duke MW's Price 2014/2015 Auction Results: • ~3,100 MWs receives B
Slide 25: International
INTERNATIONAL Reported & Adjusted Segment EBIT 2Q11 2Q10 YTD 2011 YTD 2010 ($ in Millions) Reported Segment EBIT $ 179 $ 126 $ 359 $ 266 Adjustments -- -- -- -- Adjusted Segment EBIT $ 179 $ 126 $ 359 $ 266 International Adjusted Segment (in millions) Year-over-Year Drivers EBIT Adjusted segment EBI
Slide 26: Other
OTHER Reported & Adjusted Net Expense (Income) 2Q11 2Q10 YTD 2011 YTD 2010 ($ in Millions) Reported Net Expense (Income) $ 57 $ 122 $ 102 $ 268 Adjustments (5) (83) (16) (158) Adjusted Net Expense $ 52 $ 39 $ 86 $ 110 Other Adjusted Net Expense Year-over-Year Drivers (in millions) $150 Adjusted Net
Slide 27: Pending Environmental Regulations
PENDING ENVIRONMENTAL REGULATIONS Coal Combustion Residuals (CCR) Air Toxics Rule Regulates coal combustion residuals (e.g., coal ash) Utility boiler Maximum Achievable Control Technology (MACT) New rule proposed in June 2010 rule regulating Hazardous Air Pollutants (e.g., mercury and Final
Slide 28: Pending EPA Regulations Will Impact U.S. Generation
PENDING EPA REGULATIONS WILL IMPACT U.S. GENERATION Major Regulations Duke Energy Domestic Generation Considerations for EPA Coal Combustion Coal Generation Profile Transition period must TODAY – 16.7 GW POST MODERNIZATION* – 15.0 GW Residuals (Coal Ash) 4% be reasonable to allow 19% utilities time
Slide 29: Positioning Our Coal Fleet for EPA Regulations
POSITIONING OUR COAL FLEET FOR EPA REGULATIONS Coal Generation Profile - Current Plans for Coal Generation Without Controls Retirement commitments associated with Cliffside Unit 6: Carolinas Dan River and Cliffside 1-4 ~475MW to be retired in 2011/12 Carolinas 3.4 GW 2.5 GW 1.6 GW Riverbend ~4
Slide 30: Duke Energy Steam Facility Data
DUKE ENERGY STEAM FACILITY DATA Structure Operating State Jurisdiction Steam Unit Facility Owned Capacity (MW) Fuel Type Current Cooling Method Emissions Controls Regulated In Operation DE Carolinas Allen 1127 Coal Once-Through Scrubber Regulated In Operation DE Carolinas Belews Creek 2220 Coal Once
Slide 31: Dividend Policy
DIVIDEND POLICY Increased the dividend by $0.005 per share (~2%) to $0.25 per share in June 2011, payable September 2011 Duke Energy dividend policy to be maintained post-merger closing Continued growth in dividend at a rate slower than growth of adjusted diluted EPS Targeting a long-term pa
Slide 32: Liquidity
LIQUIDITY Liquidity (as of June 30, 2011) ($ 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) - (150)
Slide 33: 2011 Summary Cash Flows
2011 SUMMARY CASH FLOWS ($ in Millions) 2011E Primary Sources: Expected 2011 Financing Plan Adjusted Net Income (1) $ 1,825 Estimated Debt Scheduled Debt Depreciation & Amortization 2,000 ($ in Millions) (3) (4) Issuances Maturities Deferred and Accrued Taxes 910 Other Sources / (Uses), net (2) (600
Slide 34: Upcoming Activities
UPCOMING ACTIVITIES Event Date Special Shareholder Meeting August 23rd Third Quarter 2011 Earnings Call November 3rd Fourth Quarter 2011 Earnings Call TBD Second Quarter Earnings Review and Business Update August 2, 2011 34
Slide 35: Second Quarter Earnings Review and Business Update August 2, 2011
Second Quarter Earnings Review and Business Update August 2, 2011 35 35
Slide 36: Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations Second Quarter Earnings Review & Business Update August 2, 2011 Adjusted Diluted Earnings per Share (“EPS”) The materials for Duke Energy Corporation’s (“Duke Energy”) Second Quarter Earnings Review and Business Update on August 2, 2011, include a dis
Slide 37: Adjusted Segment EBIT and Adjusted Other Net Expenses
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 Adjusted Other Net Expenses for 2011 and 2010 and Forecasted Adjusted Segment EBIT and Adjusted Other Net Expenses for 2011 T
Slide 38: Customer Switching and Electric Security Plan Pricing Notes
pricing is generally significantly lower than the revenue pricing under the Electric Security Plan. As of June 30, 2011, approximately 67% of Electric Security Plan customer load has switched to alternative energy providers, and approximately 60% of that switched customer load has been acquired by D
Slide 39: Adjusted to Reported Earnings Reconciliation – Three Months Ended June 30, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended June 30, 2011 (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Achieve, Adjusted Progress Reported Earnings Merger Earnings SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUIN
Slide 40: Adjusted to Reported Earnings Reconciliation – Three Months Ended June 30, 2010
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended June 30, 2010 (Dollars in millions, except per-share amounts) Special Items (Note 1) Voluntary Opportunity Costs to Plan/Office Goodwill and Economic Adjusted Achieve, Consolidation Other Hedges (Mark- Discontinu
Slide 41: Adjusted to Reported Earnings Reconciliation – Six Months Ended June 30, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Six Months Ended June 30, 2011 (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Achieve, Economic Adjusted Progress Hedges (Mark- Total Reported Earnings Merger to-Market) * Adjustments Earnings SEGME
Slide 42: Adjusted to Reported Earnings Reconciliation – Six Months Ended June 30, 2010
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Six Months Ended June 30, 2010 (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 Hedges (Mark- Dis
Slide 43: 2011 Forecasted Cash Flow Reconciliation
Duke Energy Corporation 2011 Forecasted Cash Flow Reconciliation, Required by SEC Regulation G Second Quarter Earnings Review and Business Update August 2, 2011 ($ in millions) Forecast 2011 Primary Sources: Adjusted net income (1) (a) $ 1,825 Depreciation & amortization (a) 2,000 Deferred and accru
Slide 44: Available Liquidity Reconciliation
Duke Energy Corporation Available Liquidity Reconciliation As of June 30, 2011 (In millions) Cash and Cash Equivalents $1,362 Less: Amounts Held in Foreign Jurisdictions (931) $431 Plus: Remaining Availability under Master Credit and Regional Bank Credit Facilities 2,465 Total Available Liquidity as