Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Q3 2013 Earnings Presentation
62 slides from Duke Energy Corporation (Holding Company)'s earnings presentation, Nov 6, 2013
Slide 1: Third Quarter 2013 Earnings Review and Business Update
Third Quarter 2013 Earnings Review and Business Update November 6, 2013 Lynn Good, President and CEO Steve Young, Executive VP and CFO
Slide 2: Welcome and Safe Harbor statement
Welcome and 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
Slide 3: Topics for today's call
Topics for today’s call 3Q-2013 accomplishments and financial update 4Q-2013 and full-year 2014 key earnings drivers Status of near-term priorities Future growth opportunities 3 | Third Quarter 2013 Earnings Review and Business Update
Slide 4: Quarterly highlights and key accomplishments
Quarterly highlights and key accomplishments Key Accomplishments – Financial: Narrowed full-year 2013 EPS guidance range to $4.25-$4.45 Announced sale of DukeNet to Time Warner Cable in October Long-term debt credit ratings upgraded by Moody’s – Operational: Achieved 3Q-2013 nuclear capacity
Slide 5: 3Q-2013 earnings summary and key drivers
3Q-2013 earnings summary and key drivers Adjusted diluted EPS 3Q-2013 Key adjusted segment income drivers (2) USFE&G (+$16 million) +$0.02 ▲Increased pricing and riders (3) +$0.16 $3.74 ▲Increased retail volumes and wholesale net margin +$0.07 $3.35 ▼Unfavorable weather ($0.11) ▼Higher depreciation
Slide 6: USFE&G weather-normalized volume trends and economic update
USFE&G weather-normalized volume trends and economic update – 3Q-2013 weather-normalized load increased USFE&G weather-normal volume changes 1.7% compared to the prior year quarter Residential Commercial Industrial Total – Residential: steady growth in average number of customers of 0.8%; usage per
Slide 7: 4Q-2013 drivers support 2013 EPS guidance range
4Q-2013 drivers support 2013 EPS guidance range Primary 4Q-2013 year-over-year EPS drivers (1)(2) $0.90 - ▲ Revised customer rates resulting from regulatory outcomes $1.10 $0.70 ▲ Nuclear outage cost levelization benefits ▲ Cost control efforts ▲ Growth in customer load and USFE&G wholesale business
Slide 8: Achieving merger benefits for customers and investors
Achieving merger benefits for customers and investors Fuel and Joint Dispatch savings Non-fuel O&M savings Guaranteed approximately $687 million in Targeting merger and other cost control joint dispatch and fuel savings for Carolinas savings of ~$550 million by 2014 customers over 5 years (1)
Slide 9: Full-year 2014 earnings growth considerations
Full-year 2014 earnings growth considerations – 2014 earnings guidance to be Primary full-year 2013 to 2014 earnings drivers provided in February 2014 USFE&G ▲Full year benefit from NC, SC and OH rate cases – Long-term EPS (1) growth ▲Normal weather potential remains strong and is ▲Growth in USFE&G
Slide 10: On-track to achieve financial objectives for 2013 and beyond
On-track to achieve financial objectives for 2013 and beyond Achieve narrowed Grow 2013 EPS guidance EPS 4 - 6% $4.25 - $4.45 (1) 2013 to 2015 (1)(2) Grow Maintain strong dividend at 65 - 70% credit ratings and target payout (1) balance sheet (1) Based on adjusted diluted EPS (2) Long-term adjusted
Slide 11: Completing our near-term priorities
Completing our near-term priorities Crystal CrystalRiver Crystal River3 River 33 repair repairrepair or or retire or Approval of Resolve ResolveNorth North retire decision decision retire decision Edwardsport Carolina Carolina settlement investigations investigations Ongoing Priorities Edwar
Slide 12: Developing future growth opportunities beyond 2015
Developing future growth opportunities beyond 2015 T&D infrastructure investments in Indiana (SB 560) Midwest Environmental compliance New generation needs Lee CC (Anderson Co., SC) Retail sales growth Wholesale opportunities T&D investments Carolinas Environmental compliance Inves
Slide 13: Appendix materials
Appendix materials Item Slides Update on key 2013 assumptions 14-16 3Q-2013 earnings supplement 17-28 Environmental overview 29-35 Additional financial information 36-42 Upcoming events 43 13 | Third Quarter 2013 Earnings Review and Business Update
Slide 14: Update on key 2013 assumptions
Update on key 2013 assumptions 14 | Third Quarter 2013 Earnings Review and Business Update
Slide 15: Business segment structure
Business segment structure DUKE ENERGY U.S. FRANCHISED COMMERCIAL INTERNATIONAL ELECTRIC AND GAS POWER ENERGY North and South Duke Energy Duke Energy Carolinas Carolina Renewables North and South Duke Energy Duke Energy Progress Carolina Retail Duke Energy Florida Florida Duke Energy Indiana Indiana
Slide 16: Update on key 2013 earnings guidance assumptions
Update on key 2013 earnings guidance assumptions ($ in millions) 2013 2013 YTD assumptions (thru 9/30/13) Adjusted segment income (expense) (1): USFE&G $2,755 $2,169 International Energy $405 $300 Commercial Power $95 $18 Other ($205) ($122) Duke Energy Consolidated $3,050 $2,365 Additional consolid
Slide 17: 3Q-2013 earnings supplement
3Q-2013 earnings supplement 17 | Third Quarter 2013 Earnings Review and Business Update
Slide 18: Achieving non-fuel merger-related savings – 3Q-2013 status
Achieving non-fuel merger-related savings – 3Q-2013 status Non-fuel O&M Run-rate non-fuel O&M synergies focus area Key initiatives Status Releasing ~1,100 employees through Voluntary Severance Program Consolidating administrative functions (e.g. finance, Functional IT, HR, payroll, legal, insura
Slide 19: US Franchised Electric & Gas
US Franchised Electric & Gas Reported & adjusted segment income Adjusted segment income history YTD YTD ($ in millions) ($ in millions) 3Q13 3Q12 $1,000 2013 2012 $750 Reported segment income $ 923 $ 790 $ 1,932 $ 1,263 $500 $250 Adjustments -- 117 237 325 $0 Adjusted segment income $ 923 $ 907 $ 2,
Slide 20: USFE&G normalized volume trends, by jurisdiction
USFE&G normalized volume trends, by jurisdiction Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy USFE&G Carolinas Progress Florida Indiana Ohio/Kentucky 5.2% 1.3% 1.2% 1.3% 1.0% 1.1% 0.8% 0.5% 0.5% 0.6% 0.7% 0.5% 0.2% 0.2% 0.3% 0.2% 0.1% 0.1% 0.1% -0.3% -0.3% -0.6% -0.7% -1.5% Residentia
Slide 21: USFE&G quarterly weather impacts
USFE&G quarterly weather impacts Weather segment 2013 2012 income to normal: Pretax impact Weighted avg. EPS impact – Pretax impact Weighted avg. EPS impact – diluted shares favorable / diluted shares favorable / (unfavorable) (unfavorable) First Quarter (1) $25 705 $0.02 ($80) 446 ($0.12) Second Qu
Slide 22: Duke Energy Florida cost of removal history
Duke Energy Florida cost of removal history (1) 2012 2013 ($ in millions) 2010 (2) 2011 (2) Full 1Q (2) 2Q (2) 3Q 4Q 1Q 2Q 3Q 4Q YTD Yr (2) Amount recognized $60 $250 $58 $-- $60 $60 $120 $56 $17 $22 $95 (pre-tax) Balance remaining $461 $246 $216 $232 $169 $110 $110 $58 $41 $19 $19 (1) The cost of r
Slide 23: Nuclear outage levelization
Nuclear outage levelization – Retail portion of planned nuclear outages will be Refueling Last Utility Plant Unit deferred to a regulatory asset and amortized over the Cycle Outage applicable fuel cycle DEC Catawba (1) Unit 1 18 months Fall 2012 – Amortization begins in the month following outage co
Slide 24: International Energy
International Energy Reported & adjusted segment income Adjusted segment income history YTD YTD ($ in millions) ($ in millions) 3Q13 3Q12 $250 2013 2012 $200 Reported segment income $ 116 $ 103 $ 300 $ 350 $150 $100 Adjustments -- -- -- -- $50 $0 Adjusted segment income $ 116 $ 103 $ 300 $ 350 Q1 Q2
Slide 25: Brazil's reservoir levels – SE region
Brazil’s reservoir levels – SE region – Reservoir levels, although low, are slightly better than prior year – Current reservoir levels are well above 2001 levels, which led to rationing 25 | Third Quarter 2013 Earnings Review and Business Update
Slide 26: Commercial Power
Commercial Power Reported & adjusted segment income Adjusted segment income history YTD YTD ($ in millions) ($ in millions) 3Q13 3Q12 $40 2013 2012 $30 Reported segment income $ 27 $ 12 $ 26 $ 71 $20 $10 Adjustments (12) 19 (8) 22 $0 -$10 Adjusted segment income $ 15 $ 31 $ 18 $ 93 Q1 Q2 Q3 Q4 2012
Slide 27: Duke Energy Ohio's cost-based capacity filing update
Duke Energy Ohio’s cost-based capacity filing update Cost-based capacity filing – In August 2012, Duke Energy Ohio filed a request with the Public Utilities Commission of Ohio (PUCO) for approval to recover $729 million of capacity costs. – Filing is consistent with new state, cost-based compensatio
Slide 28: Other
Other Reported & adjusted segment expense Adjusted segment expense history YTD YTD ($ in millions) ($ in millions) 3Q13 3Q12 $0 2013 2012 -$20 Reported segment expense $ (76) $ (315) $ (292) $ (356) -$40 -$60 Adjustments 54 299 170 312 -$80 -$100 Adjusted segment expense $ (22) $ (16) $ (122) $ (44)
Slide 29: Environmental overview
Environmental overview 29 | Third Quarter 2013 Earnings Review and Business Update
Slide 30: Pending environmental regulations
Pending environmental regulations Rule overview Potential impacts to Duke Energy Regulates Hazardous Air Pollutants (e.g., mercury & non-mercury HAPs) Additional air emissions control Mercury and Air EPA published final rule on February 16, 2012 equipment Toxics Standards Rule Compliance dea
Slide 31: Pending environmental regulations, cont.
Pending environmental regulations, cont. Rule overview Potential impacts to Duke Energy Regulates coal combustion residuals (e.g., coal ash) Close or upgrade wet ash ponds Coal Combustion Rule proposed in June 2010 Upgrade wet ash handling to dry Residuals Rule (CCR) EPA has stated that it
Slide 32: Pending EPA regulations will impact U.S. generation
Pending EPA regulations will impact U.S. generation Major regulations Duke Energy domestic generation (as of 9/30/13) Considerations for EPA Coal Combustion Coal generation profile Transition period must Residuals Rule TODAY – POST MODERNIZATION (2) – be reasonable to allow 22.5 GW (1) 4% 20.2 GW (
Slide 33: Positioning our coal fleet for EPA regulations
Positioning our coal fleet for EPA regulations Coal generation profile – as of 9/30/13 Plans for coal generation without controls Duke Carolinas 4.3 GW 2.5 GW 0.4 – Lee 1&2 ~200 MW potential to be retired by 2015 ~7.2 GW GW – Lee 3 ~170 MW expected to be converted to gas in 2014 Duke Progress 3.3 GW
Slide 34: Duke Energy steam facility data (As of 9/30/13)
Duke Energy steam facility data (As of 9/30/13) Owned capacity – Structure Operating state Jurisdiction Steam unit facility summer rating (MW) Fuel type Current cooling method Emissions controls Regulated In Operation DE Carolinas Allen 1,127 Coal Once-Through Scrubber Regulated In Operation DE Caro
Slide 35: Duke Energy steam facility data, cont. (As of 9/30/13)
Duke Energy steam facility data, cont. (As of 9/30/13) Owned capacity – Structure Operating state Jurisdiction Steam unit facility summer rating (MW) Fuel type Current cooling method Emissions controls Regulated In Operation DE Indiana Cayuga 1,005 Coal Once-Through Scrubber; SCR Under Construction
Slide 36: Additional financial information
Additional financial information 36 | Third Quarter 2013 Earnings Review and Business Update
Slide 37: Long-term adjusted earnings growth of 4-6% from 2013 through 2015
Long-term adjusted earnings growth of 4 - 6% from 2013 through 2015 Adjusted diluted EPS summary (1)(2) Long-term segment earnings drivers USFE&G ― Continued investment in regulated fleet: resulting in earnings base growth of 4% 6% growth ― Full benefit of 2013 rate cases in 4% growth 2014 ― Long-te
Slide 38: Continued dividend growth
Continued dividend growth – Dividend supported by strong regulated DUK annual dividend per share history earnings base – 87-year history of consecutive quarterly cash dividends – Increased quarterly dividend $0.015 to $0.78/share; paid in September 2013 – Duke Energy dividend policy: – Grow dividend
Slide 39: Simplified financing structure
Simplified financing structure Duke Energy (HoldCo) Cinergy Corp. Duke Energy Progress Energy (HoldCo) International (HoldCo) (1) Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Carolinas Ohio Indiana Progress Florida Duke Energy Commercial Paper and LT Financings Duke Energy Money Pool
Slide 40: Progress on 2013 financing plan
Progress on 2013 financing plan (as of November 6, 2013) (1) ($ in millions) $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $- Duke Duke Duke Duke Duke Duke International Renewables (4) Energy Energy Energy Energy Energy Energy (2) (4) (HoldCo) Progress Indiana Carolinas Florida (3) Ohio Maturities
Slide 41: Liquidity summary (as of September 30, 2013)
Liquidity summary (as of September 30, 2013) ($ in millions) Duke Duke Duke Duke Duke Duke Duke Energy Carolinas Progress Florida Indiana Ohio Kentucky Total Master Credit Facility (1) $ 1,750 $ 1,250 $ 750 $ 750 $ 750 $ 650 $ 100 $ 6,000 Less: Notes payable and commercial paper (2) (256) (300) (244
Slide 42: Credit ratings (as of November 6, 2013)
Credit ratings (as of November 6, 2013) Holding companies Operating companies Fitch Moody's S&P Fitch Moody's S&P DUKE ENERGY Stable Stable Stable DUKE ENERGY CAROLINAS Stable Stable Stable Corporate Credit / Issuer Rating BBB+ Baa1 BBB+ Senior Secured Debt A+ Aa3 A Senior Unsecured Debt BBB+ Baa1 B
Slide 43: Upcoming events
Upcoming events Event Date EEI financial conference November 10-12, 2013 4Q-2013 earnings call (tentative) February 18, 2014 43 | Third Quarter 2013 Earnings Review and Business Update
Slide 44: For additional information on Duke Energy, please visit
For additional information on Duke Energy, please visit: www.duke-energy.com/investors
Slide 45: Non-GAAP Reconciliations Third Quarter Earnings Review & Business Update
Duke Energy Corporation Non-GAAP Reconciliations Third Quarter Earnings Review & Business Update November 6, 2013 Adjusted Diluted Earnings per Share (“EPS”) The materials for Duke Energy Corporation’s (“Duke Energy”) Third Quarter Earnings Review and Business Update on November 6, 2013 include a di
Slide 46: Non-GAAP measure definitions (continued)
earnings immediately as such derivative contracts do not qualify for hedge accounting or regulatory treatment (as discussed separately under “Adjusted Diluted Earnings per Share (“EPS”)”). The most directly comparable GAAP measure for adjusted diluted EPS is reported diluted EPS from continuing oper
Slide 47: Effective tax rate reconciliation
directly comparable GAAP measure is included below (amounts in millions). Due to the forward-looking nature of the 2013 forecasted ETR, information to reconcile it to the most directly comparable GAAP financial measure is not available at this time, as management is unable to project all special ite
Slide 48: Available Liquidity definition
directly comparable GAAP financial measure is not available at this time, as management is unable to project special items or mark-to-market adjustments for future periods. Available Liquidity The materials for Duke Energy’s Third Quarter Earnings Review and Business Update on November 6, 2013 inclu
Slide 49: Adjusted to Reported Earnings Reconciliation – Three Months Ended September 30, 2013
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILATION Three Months Ended September 30, 2013 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Economic Hedges Discontinued Adjusted Earnings Progress Merger (Mark-to-Market) * Operations Total Adjustments Rep
Slide 50: Adjusted to Reported Earnings Reconciliation – Nine Months Ended September 30, 2013
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Nine Months Ended September 30, 2013 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Nuclear Crystal River Economic Adjusted Progress Development Litigation Unit 3 Hedges (Mark- Discontinued Total Re
Slide 51: Adjusted to Reported Earnings Reconciliation – Three Months Ended September 30, 2012
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended September 30, 2012 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, DNC Host Economic Adjusted Progress Committee Edwardsport Hedges (Mark- Discontinued Total Reported Earnings Merg
Slide 52: Adjusted to Reported Earnings Reconciliation – Nine Months Ended September 30, 2012
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Nine Months Ended September 30, 2012 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Voluntary DNC Host Economic Adjusted Progress Opportunity Edwardsport Committee Hedges (Mark- Discontinued Total R
Slide 53: Adjusted to Reported Earnings Reconciliation – Three Months Ended June 30, 2013
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended June 30, 2013 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Progress Nuclear Crystal River Economic Adjusted Energy Development Litigation Unit 3 Hedges (Mark- Discontinued Total
Slide 54: Adjusted to Reported Earnings Reconciliation – Three Months Ended March 31, 2013
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended March 31, 2013 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Economic Adjusted Progress Hedges (Mark- Total Reported Earnings Energy Merger to-Market) * Adjustments Earnings SEGM
Slide 55: Adjusted to Reported Earnings Reconciliation – Three Months Ended December 31, 2012
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended December 31, 2012 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Progress Economic Adjusted Energy Edwardsport Hedges (Mark- Discontinued Total Reported Earnings Merger Charges to
Slide 56: Adjusted to Reported Earnings Reconciliation – Three Months Ended June 30, 2012
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended June 30, 2012 (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Achieve, Economic Adjusted Progress Hedges (Mark- Discontinued Total Reported Earnings Merger to-Market) * Operations
Slide 57: Adjusted to Reported Earnings Reconciliation – Three Months Ended March 31, 2012
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended March 31, 2012 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Progress Voluntary Economic Adjusted Energy Opportunity Edwardsport Hedges (Mark- Discontinued Total Reported Earning
Slide 58: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended December 2012
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Twelve Months Ended December 2012 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Voluntary DNC Host Economic Adjusted Progress Opportunity Edwardsport Committee Hedges (Mark- Discontinued Total Repo
Slide 59: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended December 31, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2011 (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Economic Achieve, Emission Hedges Adjusted Progress Edwardsport Allowances (Mark-to- Discontinued Total Reported
Slide 60: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended December 31, 2010
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2010 (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 Lit
Slide 61: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended December 31, 2009
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2009 (Dollars in millions, except per-share amounts) Special Items (Note 1) Crescent Costs to Related Economic Achieve, Guarantees International Goodwill and Hedges Adjusted Cinergy and Tax Transmis
Slide 62: Available Liquidity Reconciliation As of September 30, 2013
Duke Energy Corporation Available Liquidity Reconciliation As of September 30, 2013 (In millions) Cash and Cash Equivalents $2,166 Short-Term Investments 118 Subtotal 2,284 Less: Amounts Held in Foreign Jurisdictions (1,797) Less: Unavailable Domestic Cash (31) $456 Plus: Remaining Availability unde