Document


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 June 30, 2018
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.
 
dukeenergylogo4ca41.jpg
 
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
1-6196
PIEDMONT NATURAL GAS COMPANY, INC.
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
56-0556998
 
 
 
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 ¨
 
Piedmont Natural Gas Company, Inc. (Piedmont)
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 ¨
 
Piedmont
Yes x
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke Energy
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging Growth Company ¨
Duke Energy Carolinas
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Company ¨
Progress Energy
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Company ¨
Duke Energy Progress
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Company ¨
Duke Energy Florida
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Company ¨
Duke Energy Ohio
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Company ¨
Duke Energy Indiana
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Company ¨
Piedmont
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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
 
Piedmont
Yes ¨
No x
Number of shares of Common stock outstanding at July 31, 2018:
Registrant
Description
Shares
Duke Energy
Common stock, $0.001 par value
712,354,724
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (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, Duke Energy Indiana and Piedmont 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Piedmont Natural Gas Company, Inc. Financial Statements
 
 
 
 
 
 
Note 1 – Organization and Basis of Presentation
 
Note 2 – Business Segments
 
Note 3 – Regulatory Matters
 
Note 4 – Commitments and Contingencies
 
Note 5 – Debt and Credit Facilities
 
Note 6 – Asset Retirement Obligations
 
Note 7 – Goodwill
 
Note 8 – Related Party Transactions
 
Note 9 – Derivatives and Hedging
 
Note 10 – Investments in Debt and Equity Securities
 
Note 11 – Fair Value Measurements
 
Note 12 – Variable Interest Entities
 
Note 13 – Revenue
 
Note 14 – Common Stock
 
Note 15 – Stock-Based Compensation
 
Note 16 – Employee Benefit Plans
 
Note 17 – Income Taxes
 
Note 18 – Subsequent Events
 
 
 
 
 
 
 
 
 
 
 
 
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, including those related to 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 rate case proceedings and 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;
◦
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 sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as 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 private 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 and natural gas markets and continued industry consolidation;
◦
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, including extreme weather associated with climate change;
◦
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 ability to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business;
◦
Operational interruptions to our natural gas distribution and transmission activities;
◦
The availability of adequate interstate pipeline transportation capacity and natural gas supply;
◦
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 of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;
◦
The timing and extent of changes in commodity prices and interest 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, compliance with debt covenants and conditions and general market and economic conditions;
◦
Credit ratings of the Duke Energy Registrants may be different from what is expected;
◦
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 the 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 new U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings;
◦
The impacts from potential impairments of goodwill or equity method investment carrying values; and
◦
The ability to implement our business strategy.
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 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
 
Six Months Ended
 
June 30,
 
June 30,
(in millions, except per-share amounts)
2018

 
2017

 
2018

 
2017

Operating Revenues
 
 
 
 
 
 
 
Regulated electric
$
5,178

 
$
5,118

 
$
10,462

 
$
10,031

Regulated natural gas
291

 
275

 
991

 
921

Nonregulated electric and other
174

 
162

 
325

 
332

Total operating revenues
5,643

 
5,555

 
11,778

 
11,284

Operating Expenses
 
 
 
 

 

Fuel used in electric generation and purchased power
1,574

 
1,541

 
3,250

 
2,990

Cost of natural gas
89

 
76

 
402

 
334

Operation, maintenance and other
1,544

 
1,441

 
3,008

 
2,909

Depreciation and amortization
973

 
835

 
1,940

 
1,694

Property and other taxes
315

 
307

 
631

 
611

Impairment charges
172

 
9

 
215

 
9

Total operating expenses
4,667

 
4,209

 
9,446

 
8,547

Gains (Losses) on Sales of Other Assets and Other, net
3

 
7

 
(97
)
 
18

Operating Income
979

 
1,353

 
2,235

 
2,755

Other Income and Expenses
 
 
 
 


 


Equity in earnings of unconsolidated affiliates
36

 
36

 
12

 
65

Other income and expenses, net
110

 
115

 
196

 
236

Total other income and expenses
146

 
151

 
208

 
301

Interest Expense
518

 
486

 
1,033

 
977

Income From Continuing Operations Before Income Taxes
607

 
1,018

 
1,410

 
2,079

Income Tax Expense From Continuing Operations
100

 
327

 
281

 
671

Income From Continuing Operations
507

 
691

 
1,129

 
1,408

Loss From Discontinued Operations, net of tax
(5
)
 
(2
)
 
(5
)
 
(2
)
Net Income
502

 
689

 
1,124

 
1,406

Less: Net Income Attributable to Noncontrolling Interests
2

 
3

 
4

 
4

Net Income Attributable to Duke Energy Corporation
$
500

 
$
686

 
$
1,120

 
$
1,402

 
 
 
 
 
 
 
 
Earnings Per Share – Basic and Diluted
 
 
 
 
 
 
 
Income from continuing operations attributable to Duke Energy Corporation common stockholders
 
 
 
 
 
 
 
Basic
$
0.72

 
$
0.98

 
$
1.60

 
$
2.00

Diluted
$
0.72

 
$
0.98

 
$
1.60

 
$
2.00

Loss from discontinued operations attributable to Duke Energy Corporation common stockholders
 
 
 
 
 
 
 
Basic
$
(0.01
)
 
$
—

 
$
(0.01
)
 
$
—

Diluted
$
(0.01
)
 
$
—

 
$
(0.01
)
 
$
—

Net income attributable to Duke Energy Corporation common stockholders
 
 
 
 
 
 
 
Basic
$
0.71

 
$
0.98

 
$
1.59

 
$
2.00

Diluted
$
0.71

 
$
0.98

 
$
1.59

 
$
2.00

Weighted average shares outstanding
 
 
 
 
 
 
 
Basic
703

 
700

 
702

 
700

Diluted
704

 
700

 
702

 
700


See Notes to Condensed Consolidated Financial Statements
6

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in millions)
2018

 
2017

 
2018

 
2017

Net Income
$
502

 
$
689

 
$
1,124

 
$
1,406

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

 
1

 
2

 
2

Net unrealized gains (losses) on cash flow hedges
1

 
(6
)
 
13

 
(4
)
Reclassification into earnings from cash flow hedges
(2
)
 
4

 
(1
)
 
5

Unrealized (losses) gains on available-for-sale securities
(2
)
 
4

 
(5
)
 
8

Other Comprehensive (Loss) Income, net of tax
(2
)
 
3

 
9

 
11

Comprehensive Income
500

 
692

 
1,133

 
1,417

Less: Comprehensive Income Attributable to Noncontrolling Interests
2

 
3

 
4

 
4

Comprehensive Income Attributable to Duke Energy Corporation
$
498

 
$
689

 
$
1,129

 
$
1,413



See Notes to Condensed Consolidated Financial Statements
7

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
304

 
$
358

Receivables (net of allowance for doubtful accounts of $18 at 2018 and $14 at 2017)
612

 
779

Receivables of VIEs (net of allowance for doubtful accounts of $56 at 2018 and $54 at 2017)
2,205

 
1,995

Inventory
3,177

 
3,250

Regulatory assets (includes $51 at 2018 and 2017 related to VIEs)
1,741

 
1,437

Other
437

 
634

Total current assets
8,476

 
8,453

Property, Plant and Equipment
 
 
 
Cost
130,616

 
127,507

Accumulated depreciation and amortization
(42,499
)
 
(41,537
)
Generation facilities to be retired, net
378

 
421

Net property, plant and equipment
88,495

 
86,391

Other Noncurrent Assets
 
 
 
Goodwill
19,396

 
19,396

Regulatory assets (includes $1,071 at 2018 and $1,091 at 2017 related to VIEs)
12,505

 
12,442

Nuclear decommissioning trust funds
7,132

 
7,097

Investments in equity method unconsolidated affiliates
1,168

 
1,175

Other
3,087

 
2,960

Total other noncurrent assets
43,288

 
43,070

Total Assets
$
140,259

 
$
137,914

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
2,686

 
$
3,043

Notes payable and commercial paper
3,329

 
2,163

Taxes accrued
494

 
551

Interest accrued
530

 
525

Current maturities of long-term debt (includes $229 at 2018 and $225 at 2017 related to VIEs)
2,852

 
3,244

Asset retirement obligations
716

 
689

Regulatory liabilities
485

 
402

Other
1,699

 
1,865

Total current liabilities
12,791

 
12,482

Long-Term Debt (includes $4,179 at 2018 and $4,306 at 2017 related to VIEs)
49,863

 
49,035

Other Noncurrent Liabilities
 
 
 
Deferred income taxes
6,977

 
6,621

Asset retirement obligations
9,753

 
9,486

Regulatory liabilities
15,355

 
15,330

Accrued pension and other post-retirement benefit costs
1,014

 
1,103

Investment tax credits
534

 
539

Other
1,457

 
1,581

Total other noncurrent liabilities
35,090

 
34,660

Commitments and Contingencies
 
 
 
Equity
 
 
 
Common stock, $0.001 par value, 2 billion shares authorized; 712 million shares outstanding at 2018 and 700 million shares outstanding at 2017
1

 
1

Additional paid-in capital
39,682

 
38,792

Retained earnings
2,894

 
3,013

Accumulated other comprehensive loss
(70
)
 
(67
)
Total Duke Energy Corporation stockholders' equity
42,507

 
41,739

Noncontrolling interests
8

 
(2
)
Total equity
42,515

 
41,737

Total Liabilities and Equity
$
140,259

 
$
137,914


See Notes to Condensed Consolidated Financial Statements
8

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended
 
June 30,
(in millions)
2018

 
2017

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
1,124

 
$
1,406

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion (including amortization of nuclear fuel)
2,250

 
1,953

Equity component of AFUDC
(106
)
 
(125
)
Losses (gains) on sales of other assets
97

 
(20
)
Impairment charges
215

 
9

Deferred income taxes
289

 
669

Equity in earnings of unconsolidated affiliates
(12
)
 
(65
)
Accrued pension and other post-retirement benefit costs
31

 
13

Contributions to qualified pension plans
(141
)
 
—

Payments for asset retirement obligations
(245
)
 
(272
)
Payment for disposal of other assets
(105
)
 
—

Other rate case adjustments
37

 
—

Provision for rate refunds
281

 
—

(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
7

 
(12
)
Receivables
(27
)
 
293

Inventory
70

 
153

Other current assets
21

 
(168
)
Increase (decrease) in
 
 
 
Accounts payable
(142
)
 
(505
)
Taxes accrued
(58
)
 
41

Other current liabilities
(214
)
 
(531
)
Other assets
(112
)
 
(37
)
Other liabilities
42

 
(2
)
Net cash provided by operating activities
3,302

 
2,800

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(4,375
)
 
(3,931
)
Contributions to equity method investments
(140
)
 
(287
)
Purchases of debt and equity securities
(1,908
)
 
(2,412
)
Proceeds from sales and maturities of debt and equity securities
1,866

 
2,439

Other
(88
)
 
(153
)
Net cash used in investing activities
(4,645
)
 
(4,344
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the:
 
 
 
Issuance of long-term debt
2,727

 
2,734

Issuance of common stock
820

 
—

Payments for the redemption of long-term debt
(2,190
)
 
(1,009
)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days
201

 
230

Payments for the redemption of short-term debt with original maturities greater than 90 days
(160
)
 
(32
)
Notes payable and commercial paper
1,090

 
783

Dividends paid
(1,199
)
 
(1,200
)
Other
(24
)
 
(32
)
Net cash provided by financing activities
1,265

 
1,474

Net decrease in cash, cash equivalents and restricted cash
(78
)
 
(70
)
Cash, cash equivalents and restricted cash at beginning of period
505

 
541

Cash, cash equivalents and restricted cash at end of period
$
427

 
$
471

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
978

 
$
589

Non-cash dividends
52

 
—


See Notes to Condensed Consolidated Financial Statements
9

PART I

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

 
 
 
Total

 
 
 
 
 
 
 
 
 
 
 
 
 
Net Gains

 
(Losses) Gains

 
 
 
Duke Energy

 
 
 
 
 
Common

 
 
 
Additional

 
 
 
(Losses) on

 
on Available-

 
Pension and

 
Corporation

 
 
 
 
 
Stock

 
Common

 
Paid-in

 
Retained

 
Cash Flow

 
for-Sale-

 
OPEB

 
Stockholders'

 
Noncontrolling

 
Total

(in millions)
Shares

 
Stock

 
Capital

 
Earnings

 
Hedges

 
Securities

 
Adjustments

 
Equity

 
Interests

 
Equity

Balance at December 31, 2016
700

 
$
1

 
$
38,741

 
$
2,384

 
$
(20
)
 
$
(1
)
 
$
(72
)
 
$
41,033

 
$
8

 
$
41,041

Net income
—

 
—

 
—

 
1,402

 
—

 
—

 
—

 
1,402

 
4

 
1,406

Other comprehensive income
—

 
—

 
—

 
—

 
1

 
8

 
2

 
11

 
—

 
11

Common stock issuances, including dividend reinvestment and employee benefits
—

 
—

 
17

 
—

 
—

 
—

 
—

 
17

 
—

 
17

Common stock dividends
—

 
—

 
—

 
(1,200
)
 
—

 
—

 
—

 
(1,200
)
 
—

 
(1,200
)
Distributions to noncontrolling interest in subsidiaries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2
)
 
(2
)
Other(a)
—

 
—

 
—

 
21

 
—

 
—

 
—

 
21

 
—

 
21

Balance at June 30, 2017
700

 
$
1


$
38,758


$
2,607


$
(19
)

$
7


$
(70
)

$
41,284


$
10


$
41,294

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
700

 
$
1

 
$
38,792

 
$
3,013

 
$
(10
)
 
$
12

 
$
(69
)
 
$
41,739

 
$
(2
)
 
$
41,737

Net income
—

 
—

 
—

 
1,120

 
—

 
—

 
—

 
1,120

 
4

 
1,124

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
12

 
(5
)
 
2

 
9

 
—

 
9

Common stock issuances, including dividend reinvestment and employee benefits
12

 
—

 
890

 
—

 
—

 
—

 
—

 
890

 
—

 
890

Common stock dividends
—

 
—

 
—

 
(1,251
)
 
—

 
—

 
—

 
(1,251
)
 
—

 
(1,251
)
Distributions to noncontrolling interest in subsidiaries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
(1
)
Other(b)
—

 
—

 
—

 
12

 
—

 
(12
)
 
—

 
—

 
7

 
7

Balance at June 30, 2018
712


$
1


$
39,682


$
2,894


$
2


$
(5
)

$
(67
)

$
42,507


$
8


$
42,515

(a)
Cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes.
(b)
Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

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
 
Six Months Ended
 
June 30,
 
June 30,
(in millions)
2018

 
2017

 
2018

 
2017

Operating Revenues
$
1,672

 
$
1,729

 
$
3,435

 
$
3,445

Operating Expenses
 
 
 
 
 
 
 
Fuel used in electric generation and purchased power
407

 
435

 
880

 
863

Operation, maintenance and other
499

 
483

 
950

 
978

Depreciation and amortization
289

 
269

 
561

 
523

Property and other taxes
75

 
71

 
147

 
139

Impairment charges
177

 
—

 
190

 
—

Total operating expenses
1,447

 
1,258

 
2,728

 
2,503

Losses on Sales of Other Assets and Other, net
(1
)
 
—

 
(1
)
 
—

Operating Income
224

 
471

 
706

 
942

Other Income and Expenses, net
35

 
50

 
74

 
100

Interest Expense
110

 
103

 
217

 
206

Income Before Income Taxes
149

 
418

 
563

 
836

Income Tax Expense
32

 
145

 
123

 
293

Net Income
$
117

 
$
273

 
$
440

 
$
543

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

 
1

 
1

 
1

Comprehensive Income
$
117

 
$
274

 
$
441

 
$
544


See Notes to Condensed Consolidated Financial Statements
11

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2018

 
December 31, 2017

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
16

 
$
16

Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)
172

 
200

Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017)
704

 
640

Receivables from affiliated companies
117

 
95

Inventory
984

 
971

Regulatory assets
420

 
299

Other
21

 
19

Total current assets
2,434

 
2,240

Property, Plant and Equipment
 
 
 
Cost
43,429

 
42,939

Accumulated depreciation and amortization
(15,248
)
 
(15,063
)
Net property, plant and equipment
28,181

 
27,876

Other Noncurrent Assets
 
 
 
Regulatory assets
3,234

 
2,853

Nuclear decommissioning trust funds
3,790

 
3,772

Other
1,036

 
979

Total other noncurrent assets
8,060

 
7,604

Total Assets
$
38,675

 
$
37,720

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
809

 
$
842

Accounts payable to affiliated companies
158

 
209

Notes payable to affiliated companies
740

 
104

Taxes accrued
158

 
234

Interest accrued
109

 
108

Current maturities of long-term debt
505

 
1,205

Asset retirement obligations
227

 
337

Regulatory liabilities
131

 
126

Other
412

 
486

Total current liabilities
3,249


3,651

Long-Term Debt
9,589

 
8,598

Long-Term Debt Payable to Affiliated Companies
300

 
300

Other Noncurrent Liabilities
 
 
 
Deferred income taxes
3,507

 
3,413

Asset retirement obligations
3,592

 
3,273

Regulatory liabilities
6,292

 
6,231

Accrued pension and other post-retirement benefit costs
99

 
95

Investment tax credits
230

 
232

Other
515

 
566

Total other noncurrent liabilities
14,235

 
13,810

Commitments and Contingencies


 


Equity
 
 
 
Member's equity
11,308

 
11,368

Accumulated other comprehensive loss
(6
)
 
(7
)
Total equity
11,302

 
11,361

Total Liabilities and Equity
$
38,675

 
$
37,720


See Notes to Condensed Consolidated Financial Statements
12

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended
 
June 30,
(in millions)
2018

 
2017

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
440

 
$
543

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization (including amortization of nuclear fuel)
707

 
688

Equity component of AFUDC
(39
)
 
(59
)
Losses on sales of other assets
1

 
—

Impairment charges
190

 
—

Deferred income taxes
90

 
283

Accrued pension and other post-retirement benefit costs
2

 
—

Contributions to qualified pension plans
(46
)
 
—

Payments for asset retirement obligations
(114
)
 
(123
)
Provision for rate refunds
121

 
—

(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
8

 
24

Receivables
(33
)
 
36

Receivables from affiliated companies
(22
)
 
78

Inventory
(16
)
 
(14
)
Other current assets
(33
)
 
(21
)
Increase (decrease) in
 
 
 
Accounts payable
(59
)
 
(125
)
Accounts payable to affiliated companies
(51
)
 
(120
)
Taxes accrued
(78
)
 
19

Other current liabilities
(123
)
 
(140
)
Other assets
(6
)
 
(44
)
Other liabilities
(29
)
 
(15
)
Net cash provided by operating activities
910

 
1,010

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(1,270
)
 
(1,092
)
Purchases of debt and equity securities
(976
)
 
(1,225
)
Proceeds from sales and maturities of debt and equity securities
976

 
1,228

Notes receivable from affiliated companies
—

 
66

Other
(64
)
 
(29
)
Net cash used in investing activities
(1,334
)
 
(1,052
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the issuance of long-term debt
991

 
—

Payments for the redemption of long-term debt
(702
)
 
(114
)
Notes payable to affiliated companies
636

 
534

Distributions to parent
(500
)
 
(375
)
Other
(1
)
 
(1
)
Net cash provided by financing activities
424

 
44

Net increase in cash and cash equivalents
—

 
2

Cash and cash equivalents at beginning of period
16

 
14

Cash and cash equivalents at end of period
$
16

 
$
16

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
343

 
$
200


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

 
 
 
Member's

 
Cash Flow

 
Total

(in millions)
Equity

 
Hedges

 
Equity

Balance at December 31, 2016
$
10,781

 
$
(9
)
 
$
10,772

Net income
543

 
—

 
543

Other comprehensive income
—

 
1

 
1

Distributions to parent
(375
)
 
—

 
(375
)
Other
(2
)
 
—

 
(2
)
Balance at June 30, 2017
$
10,947

 
$
(8
)
 
$
10,939

 
 
 
 
 
 
Balance at December 31, 2017
$
11,368

 
$
(7
)
 
$
11,361

Net income
440

 
—

 
440

Other comprehensive income
—

 
1

 
1

Distributions to parent
(500
)
 
—

 
(500
)
Balance at June 30, 2018
$
11,308

 
$
(6
)
 
$
11,302


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
 
Six Months Ended
 
June 30,
 
June 30,
(in millions)
2018

 
2017

 
2018

 
2017

Operating Revenues
$
2,498

 
$
2,392

 
$
5,074

 
$
4,571

Operating Expenses
 
 
 
 
 
 
 
Fuel used in electric generation and purchased power
895

 
831

 
1,871

 
1,557

Operation, maintenance and other
610

 
549

 
1,233

 
1,109

Depreciation and amortization
380

 
311

 
764

 
624

Property and other taxes
131

 
129

 
254

 
246

Impairment charges
4

 
2

 
33

 
2

Total operating expenses
2,020

 
1,822

 
4,155

 
3,538

Gains on Sales of Other Assets and Other, net
6

 
6

 
12

 
14

Operating Income
484

 
576

 
931

 
1,047

Other Income and Expenses, net
42

 
36

 
77

 
76

Interest Expense
203

 
196

 
412

 
402

Income Before Income Taxes
323

 
416

 
596

 
721

Income Tax Expense
56

 
139

 
92

 
243

Net Income
267

 
277

 
504

 
478

Less: Net Income Attributable to Noncontrolling Interests
2

 
3

 
4

 
5

Net Income Attributable to Parent
$
265

 
$
274

 
$
500

 
$
473

 
 
 
 
 
 
 
 
Net Income
$
267

 
$
277

 
$
504

 
$
478

Other Comprehensive Income, net of tax
 
 
 
 
 
 
 
Pension and OPEB adjustments
2

 
1

 
2

 
2

Net unrealized gains on cash flow hedges
1

 
5

 
3

 
6

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

 
(1
)
 
2

Other Comprehensive Income, net of tax
2


7


4


10

Comprehensive Income
269

 
284

 
508

 
488

Less: Comprehensive Income Attributable to Noncontrolling Interests
2

 
3

 
4

 
5

Comprehensive Income Attributable to Parent
$
267


$
281


$
504


$
483



See Notes to Condensed Consolidated Financial Statements
15

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2018

 
December 31, 2017

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
37

 
$
40

Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017)
130

 
123

Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017)
969

 
780

Receivables from affiliated companies
3

 
31

Notes receivable from affiliated companies
309

 
240

Inventory
1,521

 
1,592

Regulatory assets (includes $51 at 2018 and 2017 related to VIEs)
970

 
741

Other
356

 
334

Total current assets
4,295

 
3,881

Property, Plant and Equipment
 
 
 
Cost
48,896

 
47,323

Accumulated depreciation and amortization
(16,380
)
 
(15,857
)
Generation facilities to be retired, net
378

 
421

Net property, plant and equipment
32,894

 
31,887

Other Noncurrent Assets
 
 
 
Goodwill
3,655

 
3,655

Regulatory assets (includes $1,071 at 2018 and $1,091 at 2017 related to VIEs)
5,736

 
6,010

Nuclear decommissioning trust funds
3,342

 
3,324

Other
992

 
931

Total other noncurrent assets
13,725

 
13,920

Total Assets
$
50,914

 
$
49,688

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
816

 
$
1,006

Accounts payable to affiliated companies
232

 
251

Notes payable to affiliated companies
1,152

 
805

Taxes accrued
181

 
101

Interest accrued
211

 
212

Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)
1,321

 
771

Asset retirement obligations
386

 
295

Regulatory liabilities
233

 
213

Other
711

 
729

Total current liabilities
5,243

 
4,383

Long-Term Debt (includes $1,660 at 2018 and $1,689 at 2017 related to VIEs)
16,723

 
16,916

Long-Term Debt Payable to Affiliated Companies
150

 
150

Other Noncurrent Liabilities
 
 
 
Deferred income taxes
3,806

 
3,502

Asset retirement obligations
5,052

 
5,119

Regulatory liabilities
5,193

 
5,306

Accrued pension and other post-retirement benefit costs
519

 
545

Other
256

 
302

Total other noncurrent liabilities
14,826

 
14,774

Commitments and Contingencies

 

Equity
 
 
 
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017
—

 
—

Additional paid-in capital
9,143

 
9,143

Retained earnings
4,855

 
4,350

Accumulated other comprehensive loss
(26
)
 
(25
)
Total Progress Energy, Inc. stockholders' equity
13,972

 
13,468

Noncontrolling interests
—

 
(3
)
Total equity
13,972

 
13,465

Total Liabilities and Equity
$
50,914

 
$
49,688


See Notes to Condensed Consolidated Financial Statements
16

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended
 
June 30,
(in millions)
2018

 
2017

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
504

 
$
478

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion (including amortization of nuclear fuel)
945

 
733

Equity component of AFUDC
(52
)
 
(48
)
Gains on sales of other assets
(12
)
 
(15
)
Impairment charges
33

 
2

Deferred income taxes
240

 
412

Accrued pension and other post-retirement benefit costs
12

 
(5
)
Contributions to qualified pension plans
(45
)
 
—

Payments for asset retirement obligations
(108
)
 
(128
)
Other rate case adjustments
37

 
—

Provision for rate refunds
65

 
—

(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
14

 
—

Receivables
(196
)
 
(64
)
Receivables from affiliated companies
28

 
99

Inventory
71

 
95

Other current assets
(214
)
 
(220
)
Increase (decrease) in
 
 
 
Accounts payable
15

 
(211
)
Accounts payable to affiliated companies
(19
)
 
(140
)
Taxes accrued
80

 
81

Other current liabilities
(58
)
 
(148
)
Other assets
(186
)
 
(69
)
Other liabilities
4

 
(18
)
Net cash provided by operating activities
1,158

 
834

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(1,727
)
 
(1,733
)
Purchases of debt and equity securities
(812
)
 
(1,108
)
Proceeds from sales and maturities of debt and equity securities
820

 
1,123

Notes receivable from affiliated companies
(69
)
 
(60
)
Other
(81
)
 
(22
)
Net cash used in investing activities
(1,869
)
 
(1,800
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the issuance of long-term debt
989

 
923

Payments for the redemption of long-term debt
(635
)
 
(326
)
Notes payable to affiliated companies
347