Duke Energy 2011 Annual Report Download - page 175

PART II
DUKE ENERGY CORPORATION •DUKE ENERGY CAROLINAS, LLC •DUKE ENERGY OHIO, INC. •DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
Other Impairments.
As a result of project cost overages related to the Edwardsport
IGCC plant, Duke Energy Indiana recorded pre-tax charges to
earnings of $222 million in the third quarter of 2011 and $44
million in the third quarter of 2010.
Refer to Note 4 for a further discussion of the Edwardsport IGCC
project.
13. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
AND RELATED PARTY TRANSACTIONS
Duke Energy
Investments in domestic and international affiliates that are not
controlled by Duke Energy, but over which it has significant
influence, are accounted for using the equity method. Significant
investments in affiliates accounted for under the equity method are as
follows:
Commercial Power.
As of December 31, 2011, 2010 and 2009, investments
accounted for under the equity method primarily consist of Duke
Energy’s approximate 50% ownership interest in the five Sweetwater
projects (Phase I-V), which are wind power assets located in Texas
that were acquired as part of the acquisition of Catamount and a
49% ownership interest in Suez-DEGS Solutions of Ashtabula LLC.
As of December 31, 2011, Duke Energy held a 50% ownership
interest INDU Solar Holdings, LLC.
International Energy.
As of December 31, 2011, 2010 and 2009, Duke Energy
accounted for under the equity method a 25% indirect interest in
NMC, which owns and operates a methanol and MTBE business in
Jubail, Saudi Arabia.
As of December 31, 2011 and 2010, Duke Energy’s wholly-
owned subsidiary, CGP Global Greece Holdings S.A. (CGP Greece)
has as its only asset the 25% indirect interest in Attiki, and its only
third-party liability is a debt obligation that is secured by the 25%
indirect interest in Attiki. The debt obligation is also secured by Duke
Energy’s indirect wholly-owned interest in CGP Greece and is
otherwise non-recourse to Duke Energy. This debt obligation of $64
million and $66 million as of December 31, 2011 and 2010,
respectively, is reflected in Current Maturities of Long-Term Debt on
Duke Energy’s Consolidated Balance Sheets. As of December 31,
2011 and 2010, Duke Energy’s investment balance in Attiki was
$64 million and $66 million, respectively.
In November 2009, CGP Greece failed to make a scheduled
semi-annual installment payment of principal and interest on the debt
and in December 2009, Duke Energy decided to abandon its
investment in Attiki and the related non-recourse debt. The decision
to abandon the investment in Attiki was made in part due to the
non-strategic nature of the investment. In January 2010 the
counterparty to the debt issued a Notice of Event of Default, asserting
its rights to exercise CGP Greece’s voting rights in and receive CGP
Greece’s share of dividends paid by Attiki.
During 2010, the counterparty to the debt commenced a
process with the joint venture parties to find a buyer for CGP Greece’s
25% indirect interest in Attiki. Effective in January 2010, Duke
Energy no longer accounts for Attiki under the equity method, and the
investment balance remaining on Attiki was transferred to Other
within Assets on the Consolidated Balance Sheet as Duke Energy
retains legal ownership of the investment. In December 2011, Duke
Energy entered into an agreement to sell its ownership interest in
Attiki to an existing equity owner in a series of transactions that will
result in the full discharge of its debt obligations. If all conditions of
this agreement are met, Duke Energy expects the transaction to close
in March 2012.
Other.
As of December 31, 2011 and 2010, investments accounted
for under the equity method primarily include a 50% ownership
interest in the telecommunications investment, DukeNet. As of
December 31, 2009, investments accounted for under the equity
method primarily included telecommunications investments.
In December 2010, as discussed in Note 3, Duke Energy
completed an agreement with Alinda to sell a 50% ownership
interest in DukeNet. As a result of the disposition transaction,
DukeNet and Alinda are equal 50% owners in the new joint venture.
Subsequent to the closing of the DukeNet disposition transaction,
effective on December 21, 2010, DukeNet is no longer consolidated
into Duke Energy’s consolidated financial statements and is
accounted for by Duke Energy as an equity method investment.
On December 2, 2010, Duke Energy completed the sale of its
30% equity investment in Q-Comm to Windstream Corp.
(Windstream). The sale resulted in $165 million in net proceeds,
including $87 million of Windstream common shares and a $109
million pre-tax gain recorded in Gains (Losses) on Sales and
Impairments of Unconsolidated Affiliates on the Consolidated
Statements of Operations.
Additionally, Other included Duke Energy’s effective 50%
interest in Crescent which, as discussed further below, has a carrying
value of zero. Crescent emerged from bankruptcy in June 2010 and
following the bankruptcy proceeding, Duke Energy no longer has any
ownership interest in Crescent.
See Note 7 for a discussion of charges recorded in 2009 related
to performance guarantees issued by Duke Energy on behalf of
Crescent. Crescent filed Chapter 11 petitions in a U.S. Bankruptcy
Court in June 2009.
As of December 31, 2010 and 2009, the carrying amount of
investments in affiliates with carrying amounts greater than zero
approximated the amount of underlying equity in net assets.
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