Duke Energy 2011 Annual Report Download - page 240

PART II
DUKE ENERGY CORPORATION
Combined Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
Duke Energy Corporation (Duke Energy) is a holding company
that conducts substantially all of its business operations through its
subsidiaries. As specified in the merger conditions issued by various
state commissions in connection with Duke Energy’s merger with
Cinergy Corp. (Cinergy) in April 2006, there are restrictions on Duke
Energy’s ability to obtain funds from certain of its subsidiaries through
dividends, loans or advances. For further information, see Note 4 to
the Consolidated Financial Statements, “Regulatory Matters.”
Accordingly, these condensed financial statements have been
prepared on a parent-only basis. Under this parent-only presentation,
Duke Energy’s investments in its consolidated subsidiaries are
presented under the equity method of accounting. In accordance with
Rule 12-04 of Regulation S-X, these parent-only financial statements
do not include all of the information and footnotes required by
Generally Accepted Accounting Principles (GAAP) in the United
States (U.S.) for annual financial statements. Because these parent-
only financial statements and notes do not include all of the
information and footnotes required by GAAP in the U.S. for annual
financial statements, these parent-only financial statements and other
information included should be read in conjunction with Duke
Energy’s audited Consolidated Financial Statements contained within
Part II, Item 8 of this Form 10-K for the year ended December 31,
2011.
Duke Energy and its subsidiaries file a consolidated federal
income tax return and other state and foreign jurisdictional returns as
required.ThetaxableincomeofDukeEnergy’swholly-owned
operating subsidiaries is reflected in Duke Energy’s U.S. federal and
state income tax returns. Duke Energy has a tax sharing agreement
with its wholly-owned operating subsidiaries, where the separate
return method is used to allocate tax expenses and benefits to the
wholly-owned operating subsidiaries whose investments or results of
operations provide these tax expenses and benefits. The accounting
for income taxes essentially represents the income taxes that Duke
Energy’s wholly-owned operating subsidiaries would incur if each
were a separate company filing its own tax return as a C-Corporation.
2. DEBT
Summary of Debt and Related Terms
(in millions)
Weighted-
Average
Rate Year Due
December 31,
2011 2010
Unsecured debt(a) 4.3% 2013 –2021 $3,878 $2,772
Notes Payable and
commercial paper(b) 0.5% 604 450
Total debt 4,482 3,222
Short-term notes payable
and commercial paper (154) —
Total long-term debt $4,328 $3,222
(a) As of December 31, 2011, this amount includes an intercompany loan of $105
million with Duke Energy’s affiliate, Bison Insurance Company Limited.
(b) Includes $450 million at December 31, 2011 and 2010 that was classified as Long-term
Debt on the Consolidated Balance Sheets due to the existence of long-term credit facilities
which back-stop these commercial paper balances, along with Duke Energy’s ability and
intent to refinance these balances on a long-term basis. The weighted-average days to
maturity was 17 days and 14 days as of December 31, 2011 and 2010, respectively.
At December 31, 2011, Duke Energy has guaranteed
approximately $2.0 billion of debt issued by Duke Energy Carolinas,
LLC, one of Duke Energy’s wholly-owned operating subsidiaries.
In November 2011, Duke Energy issued $500 million of senior
notes, which carry a fixed interest rate of 2.15% and mature
November 15, 2016. Proceeds from the issuance will be used to
fund capital expenditures in Duke Energy’s unregulated businesses in
the U.S. and for general corporate purposes.
In August 2011, Duke Energy issued $500 million principal
amount of senior notes, which carry a fixed interest rate of 3.55%
and mature September 15, 2021. Proceeds from the issuance will
be used to repay a portion of Duke Energy’s commercial paper as it
matures, to fund capital expenditures in Duke Energy’s unregulated
businesses in the U.S. and for general corporate purposes.
In April 2011, Duke Energy filed a registration statement
(Form S-3) with the SEC to sell up to $1 billion of variable
denomination floating rate demand notes, called PremierNotes. The
Form S-3 states that no more than $500 million of the notes will be
outstanding at any particular time. The notes are offered on a
continuous basis and bear interest at a floating rate per annum
determined by the Duke Energy PremierNotes Committee, or its
designee, on a weekly basis. The interest rate payable on notes held
by an investor may vary based on the principal amount of the
investment. The notes have no stated maturity date, but may be
redeemed in whole or in part by Duke Energy at any time. The notes
arenon-transferableandmayberedeemedinwholeorinpartatthe
investor’s option. Proceeds from the sale of the notes will be used for
general corporate purposes. The balance as of December 31, 2011
is $79 million. The notes reflect a short-term debt obligation of Duke
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