10-Q


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
________________________
Commission file number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices, and Telephone Number
IRS Employer Identification No.
 
 
1-32853
DUKE ENERGY CORPORATION
(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina 28202-1803
704-382-3853
20-2777218
Commission file number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
 
Commission file number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928
DUKE ENERGY CAROLINAS, LLC
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
 
1-3274
DUKE ENERGY FLORIDA, LLC
(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
59-0247770
1-15929
PROGRESS ENERGY, INC.
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-2155481
 
1-1232
DUKE ENERGY OHIO, INC.
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
31-0240030
1-3382
DUKE ENERGY PROGRESS, LLC
(a North Carolina limited liability company)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-0165465
 
1-3543
DUKE ENERGY INDIANA, LLC
(an Indiana limited liability company)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
35-0594457
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Duke Energy Corporation (Duke Energy)
Yes x
No ¨
 
Duke Energy Florida, LLC (Duke Energy Florida)
Yes x
No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)
Yes x
No ¨
 
Duke Energy Ohio, Inc. (Duke Energy Ohio)
Yes x
No ¨
Progress Energy, Inc. (Progress Energy)
Yes x
No ¨
 
Duke Energy Indiana, LLC (Duke Energy Indiana)
Yes x
No ¨
Duke Energy Progress, LLC (Duke Energy Progress)
Yes x
No ¨
 
 
 
 



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Duke Energy
Yes x
No ¨
 
Duke Energy Florida
Yes x
No ¨
Duke Energy Carolinas
Yes x
No ¨
 
Duke Energy Ohio
Yes x
No ¨
Progress Energy
Yes x
No ¨
 
Duke Energy Indiana
Yes x
No ¨
Duke Energy Progress
Yes x
No ¨
 
 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Duke Energy
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Duke Energy Carolinas
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Progress Energy
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Duke Energy Progress
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Duke Energy Florida
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Duke Energy Ohio
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Duke Energy Indiana
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Duke Energy
Yes ¨
No x
 
Duke Energy Florida
Yes ¨
No x
Duke Energy Carolinas
Yes ¨
No x
 
Duke Energy Ohio
Yes ¨
No x
Progress Energy
Yes ¨
No x
 
Duke Energy Indiana
Yes ¨
No x
Duke Energy Progress
Yes ¨
No x
 
 
 
 
Number of shares of Common stock outstanding at April 30, 2016:
Registrant
Description
Shares
Duke Energy
Common stock, $0.001 par value
688,903,766
Duke Energy Carolinas
All of the registrant's limited liability company member interests are directly owned by Duke Energy.
Progress Energy
All of the registrant's common stock is directly owned by Duke Energy.
Duke Energy Progress
All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.
Duke Energy Florida
All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.
Duke Energy Ohio
All of the registrant's common stock is indirectly owned by Duke Energy.
Duke Energy Indiana
All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.
This combined Form 10-Q is filed separately by seven registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.



TABLE OF CONTENTS
 
 
 
 
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
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 and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:
◦
State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;
◦
The extent and timing of costs and liabilities to comply with federal and state laws, regulations, and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;
◦
The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through the regulatory process;
◦
The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
◦
Credit ratings of the Duke Energy Registrants may be different from what is expected;
◦
Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
◦
Industrial, commercial and residential growth or decline in service territories or customer bases resulting from variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including self-generation and distributed generation technologies;
◦
Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as rooftop solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;
◦
Advancements in technology;
◦
Additional competition in electric markets and continued industry consolidation;
◦
Political, economic and regulatory uncertainty in Brazil and other countries in which Duke Energy conducts business;
◦
The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes;
◦
The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;
◦
The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, and other catastrophic events such as fires, explosions, pandemic health events or other similar occurrences;
◦
The inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks;
◦
The timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
◦
The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, and general economic conditions;
◦
Declines in the market prices of equity and fixed income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;
◦
Construction and development risks associated with the completion of Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules, and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner or at all;
◦
Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
◦
The ability to control operation and maintenance costs;
◦
The level of creditworthiness of counterparties to transactions;
◦
Employee workforce factors, including the potential inability to attract and retain key personnel;
◦
The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);
◦
The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;
◦
The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
◦
The impact of potential goodwill impairments;
◦
The ability to successfully complete future merger, acquisition or divestiture plans;



◦
The expected timing and likelihood of completion of the proposed acquisition of Piedmont Natural Gas Company, Inc. (Piedmont), including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed acquisition that could reduce anticipated benefits or cause the parties to abandon the acquisition, and under certain specified circumstances pay a termination fee of $250 million, as well as the ability to successfully integrate the businesses and realize anticipated benefits and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect; and
◦
The likelihood, terms and timing of the potential sale of International Energy, excluding the equity investment in National Methanol Company (NMC), could change the presentation of certain assets, liabilities and results of operations as assets held for sale, liabilities associated with assets held for sale, and discontinued operations, respectively.
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at www.sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made and the Duke Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended
 
March 31,
(in millions, except per-share amounts)
2016

 
2015

Operating Revenues
 
 
 
Regulated electric
$
5,053

 
$
5,457

Nonregulated electric and other
400

 
377

Regulated natural gas
169

 
231

Total operating revenues
5,622

 
6,065

Operating Expenses
 
 
 
Fuel used in electric generation and purchased power – regulated
1,577

 
1,941

Fuel used in electric generation and purchased power – nonregulated
58

 
104

Cost of natural gas
60

 
111

Operation, maintenance and other
1,489

 
1,426

Depreciation and amortization
814

 
777

Property and other taxes
297

 
264

Impairment charges
3

 
—

Total operating expenses
4,298

 
4,623

Gains on Sales of Other Assets and Other, net
9

 
14

Operating Income
1,333

 
1,456

Other Income and Expenses
 
 
 
Equity in earnings of unconsolidated affiliates
8

 
13

Other income and expenses, net
79

 
74

Total other income and expenses
87

 
87

Interest Expense
511

 
403

Income From Continuing Operations Before Income Taxes
909

 
1,140

Income Tax Expense from Continuing Operations
213

 
364

Income From Continuing Operations
696

 
776

Income From Discontinued Operations, net of tax
3

 
91

Net Income
699

 
867

Less: Net Income Attributable to Noncontrolling Interests
5

 
3

Net Income Attributable to Duke Energy Corporation
$
694

 
$
864

 
 
 
 
Earnings Per Share – Basic and Diluted
 
 
 
Income from continuing operations attributable to Duke Energy Corporation common stockholders
 
 
 
Basic
$
1.00

 
$
1.09

Diluted
$
1.00

 
$
1.09

Income from discontinued operations attributable to Duke Energy Corporation common stockholders
 
 
 
Basic
$
0.01

 
$
0.13

Diluted
$
0.01

 
$
0.13

Net income attributable to Duke Energy Corporation common stockholders
 
 
 
Basic
$
1.01

 
$
1.22

Diluted
$
1.01

 
$
1.22

Weighted average shares outstanding
 
 
 
Basic
689

 
708

Diluted
689

 
708


See Notes to Condensed Consolidated Financial Statements
6

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended
 
March 31,
(in millions)
2016

 
2015

Net Income
$
699

 
$
867

Other Comprehensive Income (Loss), net of tax
 
 
 
Foreign currency translation adjustments
49

 
(125
)
Pension and OPEB adjustments
—

 
(5
)
Net unrealized losses on cash flow hedges
(14
)
 
(7
)
Reclassification into earnings from cash flow hedges
2

 
4

Unrealized gains on available-for-sale securities
4

 
—

Other Comprehensive Income (Loss), net of tax
41

 
(133
)
Comprehensive Income
740

 
734

Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests
6

 
(1
)
Comprehensive Income Attributable to Duke Energy Corporation
$
734

 
$
735



See Notes to Condensed Consolidated Financial Statements
7

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
March 31, 2016
 
December 31, 2015
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
778

 
$
857

Receivables (net of allowance for doubtful accounts of $18 at March 31, 2016 and December 31, 2015)
609

 
703

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $55 at March 31, 2016 and $53 at December 31, 2015)
1,714

 
1,748

Inventory
3,721

 
3,810

Regulatory assets
813

 
877

Other
308

 
327

Total current assets
7,943

 
8,322

Investments and Other Assets
 
 
 
Investments in equity method unconsolidated affiliates
547

 
499

Nuclear decommissioning trust funds
5,880

 
5,825

Goodwill
16,349

 
16,343

Other
3,036

 
3,042

Total investments and other assets
25,812

 
25,709

Property, Plant and Equipment
 
 
 
Cost
113,942

 
112,826

Accumulated depreciation and amortization
(38,154
)
 
(37,665
)
Generation facilities to be retired, net
644

 
548

Net property, plant and equipment
76,432

 
75,709

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
11,483

 
11,373

Other
39

 
43

Total regulatory assets and deferred debits
11,522

 
11,416

Total Assets
$
121,709

 
$
121,156

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
2,086

 
$
2,400

Notes payable and commercial paper
3,486

 
3,633

Taxes accrued
394

 
348

Interest accrued
481

 
430

Current maturities of long-term debt
2,075

 
2,074

Regulatory liabilities
404

 
400

Other
1,965

 
2,115

Total current liabilities
10,891

 
11,400

Long-Term Debt
38,232

 
37,495

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
12,825

 
12,705

Investment tax credits
493

 
472

Accrued pension and other post-retirement benefit costs
1,077

 
1,088

Asset retirement obligations
10,269

 
10,264

Regulatory liabilities
6,278

 
6,255

Other
1,703

 
1,706

Total deferred credits and other liabilities
32,645

 
32,490

Commitments and Contingencies


 


Equity
 
 
 
Common stock, $0.001 par value, 2 billion shares authorized; 689 million and 688 million shares outstanding at March 31, 2016 and December 31, 2015, respectively
1

 
1

Additional paid-in capital
37,969

 
37,968

Retained earnings
2,688

 
2,564

Accumulated other comprehensive loss
(766
)
 
(806
)
Total Duke Energy Corporation stockholders' equity
39,892

 
39,727

Noncontrolling interests
49

 
44

Total equity
39,941

 
39,771

Total Liabilities and Equity
$
121,709

 
$
121,156


See Notes to Condensed Consolidated Financial Statements
8

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
 
March 31,
(in millions)
2016

 
2015

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
699

 
$
867

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion (including amortization of nuclear fuel)
931

 
883

Equity component of AFUDC
(42
)
 
(42
)
Gains on sales of other assets
(9
)
 
(16
)
Impairment charges
3

 
43

Deferred income taxes
181

 
368

Equity in earnings of unconsolidated affiliates
(8
)
 
(13
)
Accrued pension and other post-retirement benefit costs
4

 
18

Contributions to qualified pension plans
—

 
(132
)
Payments for asset retirement obligations
(112
)
 
(26
)
(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
102

 
(47
)
Receivables
121

 
(41
)
Inventory
89

 
57

Other current assets
13

 
(63
)
Increase (decrease) in
 
 
 
Accounts payable
(210
)
 
(201
)
Taxes accrued
40

 
(63
)
Other current liabilities
(81
)
 
(85
)
Other assets
45

 
30

Other liabilities
(102
)
 
(97
)
Net cash provided by operating activities
1,664

 
1,440

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(1,645
)
 
(1,411
)
Investment expenditures
(59
)
 
(14
)
Acquisitions
—

 
(29
)
Purchases of available-for-sale securities
(1,347
)
 
(1,035
)
Proceeds from sales and maturities of available-for-sale securities
1,362

 
1,069

Net proceeds from the sales of other assets
1

 
1

Change in restricted cash
(32
)
 
(36
)
Other
(38
)
 
(1
)
Net cash used in investing activities
(1,758
)
 
(1,456
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the:
 
 
 
Issuance of long-term debt
1,140

 
497

Issuance of common stock related to employee benefit plans
7

 
15

Payments for the redemption of long-term debt
(389
)
 
(403
)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days
—

 
187

Payments for the redemption of short-term debt with original maturities greater than 90 days
(92
)
 
(643
)
Notes payable and commercial paper
(66
)
 
1,727

Distributions to noncontrolling interests
(1
)
 
—

Dividends paid
(570
)
 
(564
)
Other
(14
)
 
(15
)
Net cash provided by financing activities
15

 
801

Net (decrease) increase in cash and cash equivalents
(79
)
 
785

Cash and cash equivalents at beginning of period
857

 
2,036

Cash and cash equivalents at end of period
$
778

 
$
2,821

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
576

 
$
438


See Notes to Condensed Consolidated Financial Statements
9

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Unrealized

 
 
 
Total

 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign

 
Net

 
Gains (Losses)

 
 
 
Duke Energy

 
 
 
 
 
Common

 
 
 
Additional

 
 
 
Currency

 
Losses on

 
on Available-

 
Pension and

 
Corporation

 
 
 
 
 
Stock

 
Common

 
Paid-in

 
Retained

 
Translation

 
Cash Flow

 
for-Sale-

 
OPEB

 
Stockholders'

 
Noncontrolling

 
Total

(in millions)
Shares

 
Stock

 
Capital

 
Earnings

 
Adjustments

 
Hedges

 
Securities

 
Adjustments

 
Equity

 
Interests

 
Equity

Balance at December 31, 2014
707

 
$
1

 
$
39,405

 
$
2,012

 
$
(439
)
 
$
(59
)
 
$
3

 
$
(48
)
 
$
40,875

 
$
24

 
$
40,899

Net income
—

 
—

 
—

 
864

 
—

 
—

 
—

 
—

 
864

 
3

 
867

Other comprehensive (loss) income
—

 
—

 
—

 
—

 
(121
)
 
(3
)
 
—

 
(5
)
 
(129
)
 
(4
)
 
(133
)
Common stock issuances, including dividend reinvestment and employee benefits
1

 
—

 
8

 
—

 
—

 
—

 
—

 
—

 
8

 
—

 
8

Common stock dividends
—

 
—

 
—

 
(564
)
 
—

 
—

 
—

 
—

 
(564
)
 
—

 
(564
)
Other(a)
—

 
—

 
—

 
(3
)
 
—

 
—

 
—

 
—

 
(3
)
 
13

 
10

Balance at March 31, 2015
708

 
$
1


$
39,413


$
2,309


$
(560
)

$
(62
)

$
3


$
(53
)

$
41,051


$
36


$
41,087

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
688

 
$
1

 
$
37,968

 
$
2,564

 
$
(692
)
 
$
(50
)
 
$
(3
)
 
$
(61
)
 
$
39,727

 
$
44

 
$
39,771

Net income
—

 
—

 
—

 
694

 
—

 
—

 
—

 
—

 
694

 
5

 
699

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
48

 
(12
)
 
4

 
—

 
40

 
1

 
41

Common stock issuances, including dividend reinvestment and employee benefits
1

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
1

 
—

 
1

Common stock dividends
—

 
—

 
—

 
(570
)
 
—

 
—

 
—

 
—

 
(570
)
 
—

 
(570
)
Distributions to noncontrolling interest in subsidiaries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
(1
)
Balance at March 31, 2016
689


$
1


$
37,969


$
2,688


$
(644
)

$
(62
)

$
1


$
(61
)

$
39,892


$
49


$
39,941

(a)
The $13 million change in Noncontrolling Interests is primarily related to an acquisition of majority interest in a solar company for an insignificant amount of cash consideration.

See Notes to Condensed Consolidated Financial Statements
10

PART I


DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 
Three Months Ended
 
March 31,
(in millions)
2016

 
2015

Operating Revenues
$
1,740

 
$
1,901

Operating Expenses
 
 
 
Fuel used in electric generation and purchased power
421

 
578

Operation, maintenance and other
512

 
489

Depreciation and amortization
259

 
249

Property and other taxes
67

 
70

Total operating expenses
1,259

 
1,386

Operating Income
481

 
515

Other Income and Expenses, net
37

 
42

Interest Expense
107

 
102

Income Before Income Taxes
411

 
455

Income Tax Expense
140

 
163

Net Income
$
271

 
$
292

Other Comprehensive Income, net of tax
 
 
 
Reclassification into earnings from cash flow hedges
1

 
—

Comprehensive Income
$
272

 
$
292



See Notes to Condensed Consolidated Financial Statements
11

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
March 31, 2016

 
December 31, 2015

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
17

 
$
13

Receivables (net of allowance for doubtful accounts of $2 at March 31, 2016 and $3 at December 31, 2015)
129

 
142

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $7 at March 31, 2016 and December 31, 2015)
615

 
596

Receivables from affiliated companies
74

 
107

Notes receivable from affiliated companies
854

 
163

Inventory
1,236

 
1,276

Regulatory assets
269

 
305

Other
32

 
128

Total current assets
3,226

 
2,730

Investments and Other Assets
 
 
 
Nuclear decommissioning trust funds
3,081

 
3,050

Other
1,003

 
999

Total investments and other assets
4,084

 
4,049

Property, Plant and Equipment
 
 
 
Cost
39,833

 
39,398

Accumulated depreciation and amortization
(13,769
)
 
(13,521
)
Net property, plant and equipment
26,064

 
25,877

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
2,801

 
2,766

Other
4

 
4

Total regulatory assets and deferred debits
2,805

 
2,770

Total Assets
$
36,179

 
$
35,426

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
597

 
$
753

Accounts payable to affiliated companies
250

 
229

Taxes accrued
76

 
25

Interest accrued
134

 
95

Current maturities of long-term debt
468

 
356

Regulatory liabilities
48

 
39

Other
452

 
519

Total current liabilities
2,025


2,016

Long-Term Debt
8,592

 
7,711

Long-Term Debt Payable to Affiliated Companies
300

 
300

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
6,298

 
6,146

Investment tax credits
197

 
199

Accrued pension and other post-retirement benefit costs
105

 
107

Asset retirement obligations
3,913

 
3,918

Regulatory liabilities
2,829

 
2,802

Other
642

 
621

Total deferred credits and other liabilities
13,984

 
13,793

Commitments and Contingencies


 


Equity
 
 
 
Member's equity
11,288

 
11,617

Accumulated other comprehensive loss
(10
)
 
(11
)
Total equity
11,278

 
11,606

Total Liabilities and Equity
$
36,179

 
$
35,426


See Notes to Condensed Consolidated Financial Statements
12

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
 
March 31,
(in millions)
2016

 
2015

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
271

 
$
292

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization (including amortization of nuclear fuel)
330

 
324

Equity component of AFUDC
(23
)
 
(24
)
Deferred income taxes
145

 
113

Accrued pension and other post-retirement benefit costs
1

 
4

Contributions to qualified pension plans
—

 
(42
)
Payments for asset retirement obligations
(52
)
 
(6
)
(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
3

 
—

Receivables
2

 
16

Receivables from affiliated companies
33

 
(16
)
Inventory
40

 
7

Other current assets
102

 
2

Increase (decrease) in
 
 
 
Accounts payable
(165
)
 
(133
)
Accounts payable to affiliated companies
21

 
50

Taxes accrued
52

 
(17
)
Other current liabilities
21

 
(27
)
Other assets
26

 
44

Other liabilities
(26
)
 
(11
)
Net cash provided by operating activities
781

 
576

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(459
)
 
(448
)
Purchases of available-for-sale securities
(785
)
 
(643
)
Proceeds from sales and maturities of available-for-sale securities
785

 
643

Notes receivable from affiliated companies
(691
)
 
(605
)
Other
(18
)
 
4

Net cash used in investing activities
(1,168
)
 
(1,049
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the issuance of long-term debt
992

 
496

Payments for the redemption of long-term debt
(1
)
 
—

Distributions to parent
(600
)
 
—

Other
—

 
(6
)
Net cash provided by financing activities
391

 
490

Net increase in cash and cash equivalents
4

 
17

Cash and cash equivalents at beginning of period
13

 
13

Cash and cash equivalents at end of period
$
17

 
$
30

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
179

 
$
102


See Notes to Condensed Consolidated Financial Statements
13

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
 
 
Accumulated Other
 
 
 
 
 
Comprehensive Loss
 
 
 
 
 
Net Losses on

 
Net Losses on

 
 
 
Member's

 
Cash Flow

 
Available-for-

 
Total

(in millions)
Equity

 
Hedges

 
Sale Securities

 
Equity

Balance at December 31, 2014
$
10,937

 
$
(12
)
 
$
(1
)
 
$
10,924

Net income
292

 
—

 
—

 
292

Balance at March 31, 2015
$
11,229

 
$
(12
)
 
$
(1
)
 
$
11,216

 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
11,617

 
$
(11
)
 
$
—

 
$
11,606

Net income
271

 
—

 
—

 
271

Other comprehensive income
—

 
1

 
—

 
1

Distributions to parent
(600
)
 
—

 
—

 
(600
)
Balance at March 31, 2016
$
11,288

 
$
(10
)
 
$
—

 
$
11,278



See Notes to Condensed Consolidated Financial Statements
14

PART I


PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 
Three Months Ended
 
March 31,
(in millions)
2016

 
2015

Operating Revenues
$
2,332

 
$
2,536

Operating Expenses
 
 
 
Fuel used in electric generation and purchased power
860

 
1,032

Operation, maintenance and other
592

 
565

Depreciation and amortization
290

 
287

Property and other taxes
119

 
111

Impairment charges
2

 
—

Total operating expenses
1,863

 
1,995

Gains on Sales of Other Assets and Other, net
6

 
8

Operating Income
475

 
549

Other Income and Expenses, net
20

 
27

Interest Expense
160

 
168

Income From Continuing Operations Before Income Taxes
335

 
408

Income Tax Expense From Continuing Operations
123

 
144

Income From Continuing Operations
212

 
264

Loss From Discontinued Operations, net of tax
—

 
(1
)
Net Income
212

 
263

Less: Net Income Attributable to Noncontrolling Interests
3

 
3

Net Income Attributable to Parent
$
209

 
$
260

 
 
 
 
Net Income
$
212

 
$
263

Other Comprehensive Income (Loss), net of tax
 
 
 
Pension and OPEB adjustments
1

 
1

Reclassification into earnings from cash flow hedges
1

 
(2
)
Unrealized gains on available-for-sale securities
1

 
—

Other Comprehensive Income (Loss), net of tax
3


(1
)
Comprehensive Income
215

 
262

Less: Comprehensive Income Attributable to Noncontrolling Interests
3

 
3

Comprehensive Income Attributable to Parent
$
212


$
259



See Notes to Condensed Consolidated Financial Statements
15

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
March 31, 2016

 
December 31, 2015

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
41

 
$
44

Receivables (net of allowance for doubtful accounts of $6 at March 31, 2016 and December 31, 2015)
110

 
151

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $8 at March 31, 2016 and December 31, 2015)
627

 
658

Receivables from affiliated companies
37

 
375

Inventory
1,748

 
1,751

Regulatory assets
333

 
362

Other
237

 
156

Total current assets
3,133

 
3,497

Investments and Other Assets
 
 
 
Nuclear decommissioning trust funds
2,798

 
2,775

Goodwill
3,655

 
3,655

Other
876

 
834

Total investments and other assets
7,329

 
7,264

Property, Plant and Equipment
 
 
 
Cost
43,166

 
42,666

Accumulated depreciation and amortization
(15,008
)
 
(14,867
)
Generation facilities to be retired, net
531

 
548

Net property, plant and equipment
28,689

 
28,347

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
5,498

 
5,435

Other
5

 
5

Total regulatory assets and deferred debits
5,503

 
5,440

Total Assets
$
44,654

 
$
44,548

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
666

 
$
722

Accounts payable to affiliated companies
256

 
311

Notes payable to affiliated companies
1,436

 
1,308

Taxes accrued
95

 
53

Interest accrued
185

 
195

Current maturities of long-term debt
265

 
315

Regulatory liabilities
279

 
286

Other
861

 
891

Total current liabilities
4,043

 
4,081

Long-Term Debt
13,795

 
13,999

Long-Term Debt Payable to Affiliated Companies
150

 
150

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
4,937

 
4,790

Accrued pension and other post-retirement benefit costs
533

 
536

Asset retirement obligations
5,372

 
5,369

Regulatory liabilities
2,386

 
2,387

Other
371

 
383

Total deferred credits and other liabilities
13,599

 
13,465

Commitments and Contingencies

 

Equity
 
 
 
Common stock, $0.01 par value, 100 shares authorized and outstanding at March 31, 2016 and December 31, 2015
—

 
—

Additional paid-in capital
8,092

 
8,092

Retained earnings
5,040

 
4,831

Accumulated other comprehensive loss
(45
)
 
(48
)
Total Progress Energy, Inc. stockholders' equity
13,087

 
12,875

Noncontrolling interests
(20
)
 
(22
)
Total equity
13,067

 
12,853

Total Liabilities and Equity
$
44,654

 
$
44,548


See Notes to Condensed Consolidated Financial Statements
16

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
 
March 31,
(in millions)
2016

 
2015

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
212

 
$
263

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion (including amortization of nuclear fuel)
342

 
329

Equity component of AFUDC
(14
)
 
(14
)
Gains on sales of other assets
(7
)
 
(8
)
Impairment charges
2

 
—

Deferred income taxes
182

 
196

Accrued pension and other post-retirement benefit costs
(6
)
 
(1
)
Contributions to qualified pension plans
—

 
(42
)
Payments for asset retirement obligations
(54
)
 
(20
)
(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
6

 
(22
)
Receivables
70

 
(66
)
Receivables from affiliated companies
295

 
(21
)
Inventory
3

 
47

Other current assets
(76
)
 
302

Increase (decrease) in
 
 
 
Accounts payable
9

 
(107
)
Accounts payable to affiliated companies
(55
)
 
83

Taxes accrued
42

 
47

Other current liabilities
(64
)
 
(10
)
Other assets
(46
)
 
(21
)
Other liabilities
(7
)
 
(28
)
Net cash provided by operating activities
834

 
907

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(750
)
 
(563
)
Purchases of available-for-sale securities
(533
)
 
(298
)
Proceeds from sales and maturities of available-for-sale securities
548

 
367

Proceeds from insurance
43

 
—

Notes receivable from affiliated companies
—

 
42

Other
(15
)
 
(20
)
Net cash used in investing activities
(707
)
 
(472
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the issuance of long-term debt
53

 
—

Payments for the redemption of long-term debt
(310
)
 
(245
)
Notes payable to affiliated companies
128

 
(185
)
Distributions to noncontrolling interests
(1
)
 
—

Other
—

 
(3
)
Net cash used in financing activities
(130
)
 
(433
)
Net (decrease) increase in cash and cash equivalents
(3
)
 
2

Cash and cash equivalents at beginning of period
44

 
42

Cash and cash equivalents at end of period
$
41

 
$
44

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
228

 
$
176


See Notes to Condensed Consolidated Financial Statements
17

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
 
 
 
 
 
 
 
 
 
 
Net

 
Net Unrealized

 
 
 
Total Progress

 
 
 
 
 
 
 
Additional

 
 
 
Losses on

 
Gains on

 
Pension and

 
Energy, Inc.

 
 
 
 
 
Common

 
Paid-in

 
Retained

 
Cash Flow

 
Available-for-

 
OPEB

 
Stockholders'

 
Noncontrolling

 
Total

(in millions)
Stock

 
Capital

 
Earnings

 
Hedges

 
Sale Securities

 
Adjustments

 
Equity

 
Interests

 
Equity

Balance at December 31, 2014
$
—

 
$
7,467

 
$
3,782

 
$
(35
)
 
$
1

 
$
(7
)
 
$
11,208

 
$
(32
)
 
$
11,176

Net income
—

 
—

 
260

 
—

 
—

 
—

 
260

 
3

 
263

Other comprehensive (loss) income
—

 
—

 
—

 
(2
)
 
—

 
1

 
(1
)
 
—

 
(1
)
Other
—

 
—

 
(3
)
 
—

 
—

 
—

 
(3
)
 
3

 
—

Balance at March 31, 2015
$
—


$
7,467


$
4,039


$
(37
)

$
1


$
(6
)

$
11,464


$
(26
)

$
11,438

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
—

 
$
8,092

 
$
4,831

 
$
(31
)
 
$
—

 
$
(17
)
 
$
12,875

 
$
(22
)
 
$
12,853

Net income
—

 
—

 
209

 
—

 


 
—

 
209

 
3

 
212

Other comprehensive income
—

 
—

 
—

 
1

 
1

 
1

 
3

 
—

 
3

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
(1
)
Balance at March 31, 2016
$
—


$
8,092


$
5,040


$
(30
)

$
1


$
(16
)

$
13,087


$
(20
)

$
13,067



See Notes to Condensed Consolidated Financial Statements
18

PART I


DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 
Three Months Ended
 
March 31,
(in millions)
2016

 
2015

Operating Revenues
$
1,307

 
$
1,449

Operating Expenses
 
 
 
Fuel used in electric generation and purchased power
448

 
575

Operation, maintenance and other
386

 
375

Depreciation and amortization
175

 
152

Property and other taxes
41

 
32

Total operating expenses
1,050

 
1,134

Gains on Sales of Other Assets and Other, net
1

 
1

Operating Income
258

 
316

Other Income and Expenses, net
17

 
20

Interest Expense
63

 
60

Income Before Income Taxes
212

 
276

Income Tax Expense
75

 
93