Duke Energy 2011 Annual Report Download - page 87

PART II
restricted net assets of wholly-owned subsidiaries of Duke Energy that
may not be distributed to Duke Energy in the form of a loan or
dividend is $8.6 billion. However, Duke Energy does not have any
legal or other restrictions on paying common stock dividends to
shareholders out of its consolidated Retained Earnings account.
Although these restrictions cap the amount of funding the various
operating subsidiaries can provide to Duke Energy, management
does not believe these restrictions will have any significant impact on
Duke Energy’s ability to access cash to meet its payment of dividends
on common stock and other future funding obligations.
Off-Balance Sheet Arrangements
Duke Energy and certain of its subsidiaries enter into guarantee
arrangements in the normal course of business to facilitate
commercial transactions with third parties. These arrangements
include performance guarantees, stand-by letters of credit, debt
guarantees, surety bonds and indemnifications.
Most of the guarantee arrangements entered into by Duke
Energy enhance the credit standing of certain subsidiaries,
non-consolidated entities or less than wholly-owned entities, enabling
them to conduct business. As such, these guarantee arrangements
involve elements of performance and credit risk, which are not
included on the Consolidated Balance Sheets. The possibility of Duke
Energy, either on its own or on behalf of Spectra Energy Capital, LLC
(Spectra Capital) through indemnification agreements entered into as
part of the spin-off of Spectra Energy Corp (Spectra Energy), having to
honor its contingencies is largely dependent upon the future
operations of the subsidiaries, investees and other third parties, or the
occurrence of certain future events.
Duke Energy performs ongoing assessments of its guarantee
obligations to determine whether any liabilities have been triggered as
a result of potential increased non-performance risk by parties for
which Duke Energy has issued guarantees.
See Note 7 to the Consolidated Financial Statements,
“Guarantees and Indemnifications,” for further details of the
guarantee arrangements.
Issuance of these guarantee arrangements is not required for the
majority of Duke Energy’s operations. Thus, if Duke Energy
discontinued issuing these guarantees, there would not be a material
impact to the consolidated results of operations, cash flows or
financial position.
Other than the guarantee arrangements discussed above and
normal operating lease arrangements, Duke Energy does not have
any material off-balance sheet financing entities or structures. For
additional information on these commitments, see Note 5 to the
Consolidated Financial Statements, “Commitments and
Contingencies.”
Contractual Obligations
Duke Energy enters into contracts that require payment of cash
at certain specified periods, based on certain specified minimum
quantities and prices. The following table summarizes Duke Energy’s
contractual cash obligations for each of the periods presented.
Contractual Obligations as of December 31, 2011
Payments Due By Period
(in millions) Total
Less than 1
year
(2012)
2-3 Years
(2013 &
2014)
4-5 Years
(2015 &
2016)
More than
5Years
(2017 &
Thereafter)
Long-term debt(a) $32,144 $2,853 $ 5,040 $4,244 $20,007
Capital leases(b) 670 60 90 81 439
Operating leases(b) 481 81 125 73 202
Purchase Obligations:(h)
Firm capacity and transportation payments(c) 274 76 107 26 65
Commodity contracts(d) 12,900 3,873 4,730 2,285 2,012
Other purchase, maintenance and service obligations(e) 3,250 2,042 876 64 268
Other funding obligations(f) 480 48 96 96 240
Total contractual cash obligations(g) $50,199 $9,033 $11,064 $6,869 $23,233
(a) See Note 6 to the Consolidated Financial Statements, “Debt and Credit Facilities.” Amount includes interest payments over the life of the debt. Interest payments on variable rate debt
instruments were calculated using interest rates derived from the interpolation of the forecast interest rate curve. In addition, a spread was placed on top of the interest rates to aid in
capturing the volatility inherent in projecting future interest rates.
(b) See Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies.” Amounts in the table above include the interest component of capital leases based on the
interest rates explicitly stated in the lease agreements.
(c) Includes firm capacity payments that provide Duke Energy with uninterrupted firm access to electricity transmission capacity, and natural gas transportation contracts.
(d) Includes contractual obligations to purchase physical quantities of electricity, coal, nuclear fuel and limestone. Also, includes contracts that Duke Energy has designated as hedges,
undesignated contracts and contracts that qualify as normal purchase/normal sale (NPNS). For contracts where the price paid is based on an index, the amount is based on forward
market prices at December 31, 2011. For certain of these amounts, Duke Energy may settle on a net cash basis since Duke Energy has entered into payment netting agreements with
counterparties that permit Duke Energy to offset receivables and payables with such counterparties.
(e) Includes contracts for software, telephone, data and consulting or advisory services. Amount also includes contractual obligations for engineering, procurement and construction costs for
new generation plants and nuclear plant refurbishments, environmental projects on fossil facilities, major maintenance of certain non-regulated plants, maintenance and day to day
contract work at certain wind facilities and commitments to buy wind and combustion turbines (CT). Amount excludes certain open purchase orders for services that are provided on
demand, for which the timing of the purchase cannot be determined.
(f) Relates to future annual funding obligations to the nuclear decommissioning trust fund (NDTF) (see Note 9 to the Consolidated Financial Statements,“AssetRetirementObligations”).
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