Duke Energy 2011 Annual Report Download - page 70

PART II
Year Ended December 31, 2011 as Compared to December 31,
2010
Operating Revenues.
The decrease was driven primarily by the deconsolidation of
DukeNet Communications, LLC (DukeNet) in December 2010 and
the subsequent accounting for Duke Energy’s investment in DukeNet
as an equity method investment.
Operating Expenses.
The decrease was driven primarily by $172 million of 2010
employee severance costs related to the voluntary severance plan and
the consolidation of certain corporate office functions from the
Midwest to Charlotte, North Carolina, prior year donations of $56
million to the Duke Energy Foundation, which is a nonprofit
organization funded by Duke Energy shareholders that makes
charitable contributions to selected nonprofits and government
subdivisions, a decrease as a result of the DukeNet deconsolidation
in December 2010 and the subsequent accounting for Duke Energy’s
investment in DukeNet as an equity method investment, lower
corporate costs, and a prior year litigation reserve; partially offset by
higher costs related to the proposed merger with Progress Energy.
Gains/ (Losses) on sales of other assets and other, net.
The decrease was primarily due to the $139 million gain from
the sale of a 50% ownership interest in DukeNet in the prior year.
Other Income and Expenses, net.
ThedecreasewasdueprimarilytothesaleofDukeEnergy’s
ownership interest in Q-Comm in the prior year of $109 million;
partially offset by prior year impairments and 2011 gains on sales of
investments.
EBIT.
As discussed above, the decrease was due primarily to gains
recognized in 2010 on the sale of a 50% ownership interest in
DukeNet, the sale of Duke Energy’s ownership interest in Q-Comm in
the prior year and higher costs related to the proposed merger;
partially offset by prior year employee severance costs, prior year
donations to the Duke Energy Foundation, lower corporate costs and
a prior year litigation reserve.
Matters Impacting Future Other Results
Duke Energy previously held an effective 50% interest in
Crescent, which was a real estate joint venture formed by Duke
Energy in 2006 that filed for Chapter 11 bankruptcy protection in
June 2009. On June 9, 2010, Crescent restructured and emerged
from bankruptcy and Duke Energy forfeited its entire 50% ownership
interest to Crescent debt holders. This forfeiture caused Duke Energy
to recognize a tax loss, for tax purposes, on its interest in the second
quarter of 2010. Although Crescent has reorganized and emerged
from bankruptcy with creditors owning all Crescent interest, there
remains uncertainty as to the tax treatment associated with the
restructuring. Based on this uncertainty, it is possible that Duke
Energy could incur a future tax liability related to the tax losses
associated with its partnership interest in Crescent and the resolution
of issues associated with Crescent’s emergence from bankruptcy.
Year Ended December 31, 2010 as Compared to December 31,
2009
Operating Expenses.
The increase was driven primarily by $172 million of employee
severance costs related to the 2010 voluntary severance plan and the
consolidation of certain corporate office functions from the Midwest to
Charlotte, North Carolina, donations of $56 million to the Duke
Energy Foundation, which is a nonprofit organization funded by Duke
Energy shareholders that makes charitable contributions to selected
nonprofits and government subdivisions and a litigation reserve.
Gains/ (Losses) on sales of other assets and other, net.
The increase was primarily due to the $139 million gain from
the sale of a 50% ownership interest in DukeNet in the fourth quarter
of 2010.
Other Income and Expenses, net.
TheincreasewasdueprimarilytothesaleofDukeEnergy’s
ownership interest in Q-Comm, and a 2009 charge related to certain
guarantees Duke Energy had issued on behalf of Crescent.
EBIT.
As discussed above, the decrease was due primarily to
employee severance costs, donations to the Duke Energy Foundation,
and a litigation reserve; partially offset by gains recognized on the sale
of a 50% ownership interest in DukeNet and the sale of Duke
Energy’s ownership interest in Q-Comm.
DUKE ENERGY CAROLINAS
INTRODUCTION
Management’s Discussion and Analysis should be read in
conjunction with the accompanying Consolidated Financial
Statements and Notes for the years ended December 31, 2011,
2010 and 2009.
BASIS OF PRESENTATION
The results of operations and variance discussion for Duke
Energy Carolinas is presented in a reduced disclosure format in
accordance with General Instruction (I)(2)(a) of Form 10-K.
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