Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Q3 2011 Earnings Presentation
38 slides from Duke Energy Corporation (Holding Company)'s earnings presentation, Nov 3, 2011
Slide 1: Third Quarter Earnings Review and Business Update
THIRD QUARTER Earnings Review and Business Update November 3, 2011 Jim Rogers Chairman, President and Chief Executive Officer Lynn Good Group Executive and Chief Financial Officer
Slide 2: Safe Harbor
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 3Q 2011 earnings review and financial update Status of major construction projects Duke Energy Ohio ESP settlement Progress Energy merger update Third Quarter Earnings Review and Business Update November 3, 2011 4
Slide 5: 3Q 2011 Earnings: Progress on Earnings Objectives
3Q 2011 EARNINGS: PROGRESS ON EARNINGS OBJECTIVES Adjusted Diluted EPS 2011 Status Increasing earnings outlook $1.22 $1.22 range to $1.40 - $1.45 EPS* $0.51 $0.50 Increase from previous range of $1.35 - $1.40 primarily due to favorable weather and stronger than planned 3Q 2010 3Q 2011 YTD 2010 YTD 2
Slide 6: 3Q 2011 Earnings Summary and Drivers
3Q 2011 EARNINGS SUMMARY AND DRIVERS Adjusted Segment EBIT (in millions) 3Q11 3Q10 USFE&G Adjusted Segment EBIT Drivers – 3Q11 ▼ Increased O&M costs – ($47M) US Franchised Electric and Gas $ 943 $ 946 ▼ Less favorable weather – ($41M) ▲ Increased pricing and AFUDC, primarily from ongoing Commercial
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% 0.0% 0.2% -0.2% -0.4% -0.6% -0.7% -1.5% -2.1% 3Q10 4Q10 1Q11 2Q11 3Q11 2011 Plan 3Q10 4Q10 1Q11 2Q11 3Q11 2011 Plan Industrial USFE&G Total Change vs. Prior Year Qua
Slide 8: Meeting Industry Challenges
MEETING INDUSTRY CHALLENGES CHALLENGES DUKE ENERGY’S RESPONSE Merger with Continued Economic Progress Uncertainty Energy Aging Infrastructure Constructive Operational Regulatory Excellence Environmental Outcomes Regulations Rising System Energy Costs Modernization Third Quarter Earnings Review and B
Slide 9: Status of Major Construction Projects
STATUS OF MAJOR CONSTRUCTION PROJECTS (As of Sept. 30, 2011) Edwardsport – Indiana 96% Complete USFE&G Major Construction Projects1 • 618 MW IGCC facility $375 • Expected in-service by Fall 2012 • Cost increase pending before the IURC $475 $2,925 Cliffside – Carolinas 93% Complete $1,925 $75 $335 •
Slide 10: Duke Energy Ohio ESP Settlement
DUKE ENERGY OHIO ESP SETTLEMENT On Oct. 24, Duke Energy Ohio reached a settlement with most intervening parties related to its Electric Security Plan (ESP) application Customers benefit from generation service provided per fully competitive auctions Total non-bypassable stability charge of $33
Slide 11: Status of Merger Filings
STATUS OF MERGER FILINGS (As of November 3, 2011) Progress on Stakeholder Filed Approved Key Milestones Received shareholder approvals on August 23, 2011 Shareholder Department of Justice The parties have met their obligations under the Hart-Scott-Rodino Act, which is no Waiting Period (DOJ)
Slide 12: Appendix
APPENDIX Item Slides Update on Key 2011 Assumptions 13 Segment Results 14-22 Environmental Information 23-26 Additional Financial Information 27-28 Upcoming Activities 29 Third Quarter Earnings Review and Business Update November 3, 2011 12
Slide 13: Update on Key Assumptions for 2011
UPDATE ON KEY ASSUMPTIONS FOR 2011 ($ in Millions) 2011 FY 2011 YTD Assumptions (thru 9/30/11) USFE&G Adjusted Segment EBIT $2,995 $2,274 Commercial Power Adjusted Segment EBIT $215 $299 International Adjusted Segment EBIT $550 $527 Other Adjusted Net Expense $220 $147 Interest Expense $920 $635 Deb
Slide 14: US Franchised Electric and Gas
US FRANCHISED ELECTRIC AND GAS Reported & Adjusted Segment EBIT 3Q11 3Q10 YTD 2011 YTD 2010 ($ in Millions) Reported Segment EBIT $ 721 $ 946 $2,052 $2,361 Adjustments 222 -- 222 -- Adjusted Segment EBIT $ 943 $ 946 $2,274 $2,361 Quarter-over-Quarter Drivers USFE&G Adjusted Segment EBIT (in millions
Slide 15: Key Regulatory Filings and Dates
KEY REGULATORY FILINGS AND DATES (As of Nov. 3, 2011) CAROLINAS INDIANA OHIO FERC NC Rate Case SC Rate Case NC Merger Approval SC Merger Approval IGCC Phase I (1) IGCC CWIP Trackers Electric Security Plan Section 203 Docket E-7, Sub 989 Docket 2011-271-E Docket E-7, Sub 986 Docket 2011-158-E Docket
Slide 16: 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 – $/MWh Total Fossil P
Slide 17: Industrial Volume Quarterly Trends
INDUSTRIAL VOLUME QUARTERLY TRENDS Primary Metals Textiles Billed GwH Billed GwH 2,000 1,500 1,500 1,000 1,000 08 08 08 08 08 10 11 10 11 08 09 10 11 500 09 10 11 09 10 11 08 09 10 500 09 09 08 09 10 09 10 11 - - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Chemicals Total Industrial Billed GwH Billed GwH 1,500 12,000 9
Slide 18: USFE&G Quarterly Weather Impacts
USFE&G QUARTERLY WEATHER IMPACTS ($ in Millions) Weather EBIT to Normal: 2011 2010 First Quarter $ -- $ 60 Second Quarter $ 50 $ 80 Third Quarter $ 80 $120 Fourth Quarter $ 60 Year-to-Date $ 130 $320 Note: Favorable/(Unfavorable) Key Weather Data (3Q2011) ►Cooling Degree Days Carolinas – 1,126 (17%
Slide 19: Commercial Power
COMMERCIAL POWER Reported & Adjusted Segment EBIT ($ in Millions) 3Q11 3Q10 YTD 2011 YTD 2010 Reported Segment EBIT $ 67 $ 188 $ 217 $ (287) Adjustments 78 (33) 82 631 Adjusted Segment EBIT $ 145 $ 155 $ 299 $ 344 Quarter-over-Quarter Drivers Commercial Power Adjusted Adjusted segment EBIT decreased
Slide 20: 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 3Q 2011 23% 25% 26% 26% 26% 26% 26% 26% 27% 27% 27% 27% 28% 29% 29% 30% As of September 30, 2011 ~68% gross switching 37% 37% ~30% switching, net of D
Slide 21: International
INTERNATIONAL Reported & Adjusted Segment EBIT 3Q11 3Q10 YTD 2011 YTD 2010 ($ in Millions) Reported Segment EBIT $ 168 $ 110 $ 527 $ 376 Adjustments -- -- -- -- Adjusted Segment EBIT $ 168 $ 110 $ 527 $ 376 International Adjusted Segment (in millions) Quarter-over-Quarter Drivers EBIT Adjusted segme
Slide 22: Other
OTHER Reported & Adjusted Net Expense 3Q11 3Q10 YTD 2011 YTD 2010 ($ in Millions) Reported Net Expense $ 74 $ 100 $ 176 $ 368 Adjustments (13) (53) (29) (211) Adjusted Net Expense $ 61 $ 47 $ 147 $ 157 3Q 2011 Adjustments: • $13 million - costs-to-achieve Progress Energy merger (in millions) Other A
Slide 23: 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 24: 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 Residuals (Coal Ash) TODAY – 16.5 GW (1) POST MODERNIZATION (2) – 14.6 GW be reasonable to allow utilities time
Slide 25: Positioning Our Coal Fleet for EPA Regulations
POSITIONING OUR COAL FLEET FOR EPA REGULATIONS Coal Generation Profile - Current Plans for Coal Generation Without Controls Remaining retirement commitments associated with Cliffside Unit 6: Dan River ~275 MW expected to be retired in 2012 Carolinas Carolinas 3.4 GW 2.5 GW 1.4 GW Riverbend ~45
Slide 26: 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 27: Dividend Policy
DIVIDEND POLICY Increased the quarterly dividend by $0.005 per share (~2%) to $0.25 per share, which was paid in September 2011 Duke Energy dividend policy to be maintained post-merger closing Continued growth in dividend at a rate slower than growth of adjusted diluted EPS Targeting a long-
Slide 28: Liquidity
LIQUIDITY Liquidity (as of September 30, 2011) ($ 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) (450) (300)
Slide 29: Upcoming Activities
UPCOMING ACTIVITIES Event Date EEI Financial Conference November 6 – 8, 2011 Fourth Quarter 2011 Earnings Call February 2012 Analyst Day TBD (2012) Third Quarter Earnings Review and Business Update November 3, 2011 29
Slide 30: Third Quarter Earnings Review and Business Update November 3, 2011
Third Quarter Earnings Review and Business Update November 3, 2011 30 30
Slide 31: Duke Energy Corporation Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations Third Quarter Earnings Review & Business Update November 3, 2011 Adjusted Diluted Earnings per Share (“EPS”) The materials for Duke Energy Corporation’s (“Duke Energy”) Third Quarter Earnings Review and Business Update on November 3, 2011, include a d
Slide 32: measure for future periods, information to reconcile it to the most directly comparable GAAP
measure for future periods, information to reconcile it to the most 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. Adjusted Segment EBIT and Adjusted Other Net Expenses for 2
Slide 33: Retail Sales (“DERS”). DERS operates as Duke Energy’s competitive retail arm in Ohio. DERS
Retail Sales (“DERS”). DERS operates as Duke Energy’s competitive retail arm in Ohio. DERS revenue pricing is generally significantly lower than the revenue pricing under the Electric Security Plan. As of September 30, 2011, approximately 68% of Electric Security Plan customer load has switched to a
Slide 34: Adjusted to Reported Earnings Reconciliation – Three Months Ended Sept 30, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended September 30, 2011 (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Achieve, Emission Economic Adjusted Progress Edwardsport Allowances Hedges (Mark- Discontinued Total Reported Ear
Slide 35: Adjusted to Reported Earnings Reconciliation – Nine Months Ended Sept 30, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Nine Months Ended September 30, 2011 (Dollars in millions, except per-share amounts) Special Items (Note 1) Costs to Achieve, Emission Economic Adjusted Progress Edwardsport Allowances Hedges (Mark- Discontinued Total Reported Earn
Slide 36: Adjusted to Reported Earnings Reconciliation – Three Months Ended Sept 30, 2010
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended September 30, 2010 (Dollars in millions, except per-share amounts) Special Items (Note 1) Voluntary Opportunity Costs to Plan/Office Economic Adjusted Achieve, Consolidation Litigation Hedges (Mark- Total Reporte
Slide 37: Adjusted to Reported Earnings Reconciliation – Nine Months Ended Sept 30, 2010
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Nine Months Ended September 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 Litigation
Slide 38: Available Liquidity Reconciliation
Duke Energy Corporation Available Liquidity Reconciliation As of September 30, 2011 (In millions) Cash and Cash Equivalents $ 2,032 Short-term Investments 146 Subtotal 2,178 Less: Amounts Held in Foreign Jurisdictions (866) $1,312 Plus: Remaining Availability under Master Credit and Regional Bank Cr