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DUKE ENERGY 2006 SUMMARY ANNUAL REPORT a
Changing minds.
Changing habits.
2006 SUMMARY ANNUAL REPORT

Table of contents

  • Page 1
    Changing minds. Changing habits. 2006 SUMMARY ANNUAL REPORT DUKE ENERGY 2006 SUMMARY ANNUAL REPORT a

  • Page 2
    ...Goals 2007 Duke Energy Charter 2006 Financial Highlights Duke Energy at a Glance Defining the New Energy Equation Solving the New Energy Equation Challenging Conventional Wisdom Consolidated Financial Statements Board of Directors Executive Management Non-GAAP Financial Measures Investor Information...

  • Page 3
    .... We face a new energy equation with many variables. Increasing demand for energy is a key driver of rising energy prices. As a result, there is a renewed focus on renewable energy and energy efficiency - "save-a-watts" vs. megawatts. There is mounting concern about global climate change and further...

  • Page 4
    2

  • Page 5
    ... for growth in 2007 and beyond. We established an industry-leading electric power platform through the successful execution of the merger with Cinergy - and we did it in 11 months. (LEFT) JAMES E. ROGERS, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER DUKE ENERGY 2006 SUMMARY ANNUAL REPORT 3

  • Page 6
    ... power plants outside the Midwest and by selling our Commercial Marketing and Trading business. Formed a joint venture with Morgan Stanley Real Estate Fund for Crescent Resources. Repurchased $500 million of stock. Acquired, filed for certificate, or announced our intent to build new generation...

  • Page 7
    ...Our business plan projects a quarterly dividend increase of $0.01 beginning in the third quarter of 2007. This dividend increase - to be decided by the board of directors - would be in line with our expectation to increase dividends consistent with a 70 to 75 percent payout target. DUKE ENERGY 2006...

  • Page 8
    ... cycle (IGCC) plant in Indiana, and â- â- Exploring the development of a new nuclear plant in South Carolina. Building new power plants to meet steadily increasing demand. In the Carolinas, we are adding between 40,000 and 60,000 new customers annually. In Indiana, Kentucky and Ohio, we...

  • Page 9
    ... mix of fuels and technologies at our new plants to limit our future price, reliability and environmental risks. One of the reasons our average price for electricity is below the national average is that 98 percent of our energy is generated from coal and nuclear power. For our Cliffside Station...

  • Page 10
    .... We are again offering to make a $1 donation to The Nature Conservancy for every shareholder who signs up for electronic delivery of our annual report, proxy statement and our other financial information. Currently, more than 80,000 of you have chosen electronic delivery, and we intend to make an...

  • Page 11
    ... and sustainable value for our customers, employees, communities and investors through the production, delivery and sale of energy and energy services. To be successful in 2007 and beyond, we must: Establish the identity and culture of the new Duke Energy, unifying our people, values, strategy...

  • Page 12
    ... the U.S. Department of Energy, we are researching underground carbon storage at our East Bend Station in Kentucky. PATIENCE IS NEEDED TO CHANGE MINDS AND HABITS The strategies I've outlined will position Duke Energy to be a leader on several fronts, including new technologies, energy efficiency...

  • Page 13
    ... for change in accounting principles. (See Note 1 to the Consolidated Financial Statements in Duke Energy's 2006 Form 10-K, "Summary of Significant Accounting Policies," for further discussion.) d Includes pre-tax gains of approximately $0.9 billion, net of minority interest, related to the sale of...

  • Page 14
    ....* In 2006, Duke Energy worked with Morgan Stanley Real Estate Fund to create an effective 50/50 joint venture. â- 2007 EBIT CONTRIBUTION â- Approximately 4,000 megawatts of generation, primarily hydroelectric power, in six countries: Argentina, Brazil, Ecuador, El Salvador, Guatemala and Peru...

  • Page 15
    ... real estate company. GIANNA MANES IS SENIOR VICE PRESIDENT OF REGULATED PORTFOLIO OPTIMIZATION AND FUELS AT DUKE ENERGY'S U.S. FRANCHISED ELECTRIC AND GAS BUSINESS. THE ORGANIZATION SHE LEADS BUYS AND SELLS ELECTRICITY IN THE WHOLESALE MARKET AND PURCHASES COAL AND NATURAL GAS FOR THE GENERATION...

  • Page 16
    ... with investments in energy efficiency or new generation. BEVERLY MARSHALL (LEFT), VICE PRESIDENT FOR FEDERAL POLICY AND GOVERNMENT AFFAIRS AT DUKE ENERGY, AND JULIE GRIFFITH, VICE PRESIDENT FOR STATE GOVERNMENT AFFAIRS AT DUKE ENERGY INDIANA, ARE TWO KEY MEMBERS OF DUKE ENERGY'S PUBLIC POLICY TEAM...

  • Page 17
    ... to sustainability, we must balance the growing demand for power with the investments needed to supply it - while reducing our environmental impact and keeping prices affordable. This requires new thinking on both the policy and technology fronts. DUKE ENERGY 2006 SUMMARY ANNUAL REPORT 15

  • Page 18
    .... Generating "save-a-watts" is just one part of the equation that requires our customers to change how they use electricity. We are looking at ways to help them do that. POLICY LEADERSHIP Our stakeholders, particularly our customers, investors and communities, expect us to play a leading role...

  • Page 19
    ... - to meet future demand. JANICE HAGER IS MANAGING DIRECTOR OF INTEGRATED RESOURCE PLANNING FOR DUKE ENERGY. HER TEAM ENSURES THAT DUKE ENERGY'S SUPPLY OF ELECTRICITY KEEPS PACE WITH GROWING CUSTOMER DEMAND WHILE COMPLYING WITH ENVIRONMENTAL REQUIREMENTS. DUKE ENERGY 2006 SUMMARY ANNUAL REPORT 17

  • Page 20
    ... 2006, Duke Energy Ohio asked regulators to extend its RSP by an additional two years, through 2010. Under the proposed extension, which is being reviewed, the utility's unregulated generating assets in Ohio would continue to serve the state's retail customers. The plan supports continued electric...

  • Page 21
    ...fifth fuel" initiatives and enhance our service and reliability. THEOPOLIS HOLEMAN IS SENIOR VICE PRESIDENT OF POWER DELIVERY FOR DUKE ENERGY'S U.S. FRANCHISED ELECTRIC AND GAS OPERATIONS. HIS TEAM IS RESPONSIBLE FOR KEEPING POWER QUALITY AND RELIABILITY HIGH - 24/7. DUKE ENERGY 2006 SUMMARY ANNUAL...

  • Page 22
    ...plant, and most of the smart grid's cost would be offset by the operational and power procurement savings. Advanced metering is just one of the energy and cost-saving technologies we are exploring to change minds and habits. DAVID MOHLER (LEFT) IS VICE PRESIDENT AND CHIEF TECHNOLOGY OFFICER AT DUKE...

  • Page 23
    ... be eligible for recovery through rates. We are especially interested in building public support for investments in energy efficiency - the "fifth fuel," which lowers overall customer demand and reduces or eliminates greenhouse gases and other emissions. DUKE ENERGY 2006 SUMMARY ANNUAL REPORT 21

  • Page 24
    ...money, the environment will be cleaner and our investors will earn fair returns on their investments. STRIKING A BALANCE Changing the regulatory paradigm will also help us avoid some of the price jumps that can occur when a new plant, project, initiative or program finally gets up and running. Such...

  • Page 25
    ... PAGÁN IS DIRECTOR OF THE ENERGY MANAGEMENT AND CONSERVATION STAFF AT THE EPA'S RESEARCH TRIANGLE PARK FACILITY IN NORTH CAROLINA. THE SPRAWLING COMPLEX OF LABS, OFFICES, AND COMPUTING FACILITIES USES AN ENERGY-MONITORING SOLUTION CREATED BY DUKE ENERGY. DUKE ENERGY 2006 SUMMARY ANNUAL REPORT 23

  • Page 26
    (FROM LEFT) JOHN BOONE, BUSINESS DEVELOPMENT MANAGER, TOM FENIMORE, MANAGER OF ENERGY MANAGEMENT SERVICES, AND KEN KERNODLE, CUSTOMER RELATIONS MANAGER, WORKED ON THE DUKE ENERGY TEAMS THAT DESIGNED, DEVELOPED AND DELIVERED AN ENERGY MANAGEMENT SOLUTION FOR THE EPA. 24

  • Page 27
    ... in North Carolina, Duke Energy delivered. Three teams from Duke Energy - account management, business development and custom delivery - collaborated with the EPA's energy management team to get the job done. The first idea was to measure the allocation of electric power and its costs building by...

  • Page 28
    ... us meet steadily increasing customer demand while reducing multiple environmental impacts of our operations, including carbon emissions. RICK ROPER IS GENERAL MANAGER OF DUKE ENERGY'S CLIFFSIDE STEAM STATION IN WESTERN NORTH CAROLINA. THE 760-MEGAWATT BASE LOAD POWER PLANT HAS BEEN IN COMMERCIAL...

  • Page 29
    ...other technologies with a communication and control infrastructure. By taking our mostly analog distribution grid and converting it to a digital network, we can create an information-rich communication system. Our plan is to create the "utility of the future." DUKE ENERGY 2006 SUMMARY ANNUAL REPORT...

  • Page 30
    ... of the energy delivery system will be linked through real time communication over wires already in place in every home and business. We have several other initiatives already under way, including our broadband-over-power-line (BPL) pilot programs in Charlotte, N.C., and Cincinnati, Ohio. Our energy...

  • Page 31
    ... do business. KAY PASHOS IS VICE PRESIDENT FOR REGULATORY STRATEGY AT DUKE ENERGY. HER TEAM IS RESPONSIBLE FOR PERSUADING STATE REGULATORS TO APPROVE THE COMPANY'S REGULATORY STRATEGY, WHICH TAKES INTO ACCOUNT THE NEEDS OF BOTH CUSTOMERS AND SHAREHOLDERS. DUKE ENERGY 2006 SUMMARY ANNUAL REPORT 29

  • Page 32
    ..., maintenance and other Fuel used in electric generation and purchased power Depreciation and amortization Property and other taxes Impairments and other charges Total operating expenses Gains on Sales of Investments in Commercial and Multi-Family Real Estate Gains (Losses) on Sales of Other Assets...

  • Page 33
    ...market and hedging transactions Assets held for sale Investments in residential, commercial and multi-family real estate (net of accumulated depreciation of $17 at December 31, 2005) Other Total investments and other assets Property, Plant and Equipment Cost...DUKE ENERGY 2006 SUMMARY ANNUAL REPORT 31

  • Page 34
    ...to stock AFUDC-equity component Transfer of DEFS Canadian Facilities Debt retired in connection with disposition of business Note receivable from sale of southeastern plants Remarketing of senior notes See Notes to Consolidated Financial Statements in Duke Energy's 2006 Form 10-K. $ $ $ $ 2006 1,863...

  • Page 35
    ... of old Duke Energy shares Issuance of new Duke Energy shares Common stock issued in connection with Cinergy merger Conversion of Cinergy options to Duke Energy options Dividend reinvestment and employee benefits Stock repurchase Common stock dividends Conversion of debt to equity Tax benefit due to...

  • Page 36
    WILLIAM BARNET III G. ALEX BERNHARDT SR. MICHAEL G. BROWNING PHILLIP R. COX ANN MAYNARD GRAY JAMES H. HANCE JR. JAMES T. RHODES JAMES E. ROGERS MARY L. SCHAPIRO DUDLEY S. TAFT 34

  • Page 37
    ... of Nuclear Power Operations, the Alliance to Save Energy, the National Coal Council and the Nicholas Institute for Environmental Policy Solutions. Mary L. Schapiro Chairman and CEO, National Association of Securities Dealers (NASD); Member, Audit and Corporate Governance Committees Schapiro...

  • Page 38
    HENRY B. BARRON JR. PAUL H. BARRY LYNN J. GOOD DAVID L. HAUSER JULIA S. JANSON MARC E. MANLY WILLIAM R. MCCOLLUM JR. SANDRA P. MEYER THOMAS C. O'CONNOR CATHY S. ROCHE CHRISTOPHER C. ROLFE ELLEN T. RUFF JIM L. STANLEY R. SEAN TRAUSCHKE B. KEITH TRENT JAMES L. TURNER 36

  • Page 39
    ... leads Duke Energy's Ohio and Kentucky operations, which serve more than 810,000 customers. She was formerly group vice president of customer service, sales and marketing for Duke Power. DUKE ENERGY 2006 SUMMARY ANNUAL REPORT Thomas C. O'Connor Group Executive and President, Commercial Businesses...

  • Page 40
    ... gain on Duke Energy Field Services' ("DEFS") asset sale Costs to achieve the Cinergy merger Costs to achieve the spinoff of Spectra Energy Impairment of Campeche investment Gain on sale of interest in Crescent Gain related to the issuance of units of Natural Gas Transmission's Canadian income fund...

  • Page 41
    ... financial measure for future periods, information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time, as management is unable to forecast any special items for any future periods. DUKE ENERGY 2006 SUMMARY ANNUAL REPORT...

  • Page 42
    ... users of DUKOnline, our online account management service, may access their accounts through the Internet. Send written requests to: Investor Relations Duke Energy P.O. Box 1005 Charlotte, NC 28201-1005 For electronic correspondence, visit www.duke-energy.com/contactIR. Stock Exchange Listing Duke...

  • Page 43
    ... recycling symbol identifies post-consumer recycled content in these products. Duke Energy's annual and periodic updates on sustainability performance are available on our Web site at this link: http://www.duke-energy.com/environment/sustainability.asp. DUKE ENERGY 2006 SUMMARY ANNUAL REPORT 41

  • Page 44
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