Duke Energy 2012 Annual Report Download - page 178

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PART II
Combined Notes to Consolidated Financial Statements – (Continued)
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY
CAROLINAS, INC. • FLORIDA POWER CORPORATION d/b/a PROGRESS ENERY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
December 31, 2011
(in millions)
Duke
Energy
Duke Energy
Carolinas
Duke Energy
Ohio
Duke Energy
Indiana
Tax exempt bonds(a)(b)(c)(d) $ 491 $ 95 $111 $285
Notes payable and commercial paper(e) 450 300 — 150
DERF 300 300 — —
Total $ 1,241 $695 $111 $435
(a) Of the $491 million of tax-exempt bonds outstanding at December 31, 2011 at Duke Energy, the master credit facility served as a backstop for $287 million of these tax-exempt bonds (of which $27 million is in the form of
letters of credit), with the remaining balance backstopped by other specifi c long-term credit facilities separate from the master credit facility.
(b) For Duke Energy Carolinas, the master credit facility served as a backstop for the $95 million of tax-exempt bonds outstanding at December 31, 2011.
(c) For Duke Energy Ohio, this master credit facility (of which $27 million is in the form of letters of credit) served as a backstop for the $111 million of tax-exempt bonds outstanding at December 31, 2011.
(d) Of the $285 million of tax-exempt bonds outstanding at December 31, 2011 at Duke Energy Indiana, $81 million were backstopped by Duke Energy’s master credit facility, with the remaining balance backstopped by other
specifi c long-term credit facilities separate from the master credit facility.
(e) Duke Energy has issued $450 million in Commercial Paper, which is backstopped by the master credit facility, and the proceeds are in the form of loans through the money pool to Duke Energy Carolinas of $300 million and
Duke Energy Indiana of $150 million as of December 31, 2011.
In January 2012, Duke Energy Indiana and Duke Energy Kentucky
collectively entered into a $156 million 2-year bilateral letter of credit
agreement, under which Duke Energy Indiana and Duke Energy Kentucky may
request the issuance of letters of credit up to $129 million and $27 million,
respectively, on their behalf to support various series of variable rate demand
bonds. In addition, Duke Energy Indiana entered into a $78 million 2-year
bilateral letter of credit facility. These credit facilities may not be used for any
purpose other than to support the variable rate demand bonds issued by Duke
Energy Indiana and Duke Energy Kentucky. In February 2012, letters of credit
were issued corresponding to the amount of the facilities to support various
series of tax-exempt bonds at Duke Energy Indiana and Duke Energy Kentucky.
In February 2013, the letters of credit were amended to extend the expiration
date to January 2015.
Restrictive Debt Covenants
The Duke Energy Registrants’ debt and credit agreements contain various
fi nancial and other covenants. The master credit facility contains a covenant
requiring the debt-to-total capitalization ratio to not exceed 65% for each
borrower. Failure to meet those covenants beyond applicable grace periods
could result in accelerated due dates and/or termination of the agreements. As
of December 31, 2012, each of the Duke Energy Registrants were in compliance
with all covenants related to its signifi cant debt agreements. In addition, some
credit agreements may allow for acceleration of payments or termination of
the agreements due to nonpayment, or the acceleration of other signifi cant
indebtedness of the borrower or some of its subsidiaries. None of the signifi cant
debt or credit agreements contain material adverse change clauses.
Other Loans
During 2012 and 2011, Duke Energy had loans outstanding against the
cash surrender value of the life insurance policies that it owns on the lives of
its executives. The amounts outstanding were $496 million and $457 million as
of December 31, 2012 and 2011, respectively. The amounts outstanding were
carried as a reduction of the related cash surrender value that is included in
Other within Investments and Other Assets on the Consolidated Balance Sheets.
7. GUARANTEES AND INDEMNIFICATIONS
Duke Energy and its subsidiaries have various fi nancial and performance
guarantees and indemnifi cations, which are issued in the normal course of
business. As discussed below, these contracts include performance guarantees,
stand-by letters of credit, debt guarantees, surety bonds and indemnifi cations.
Duke Energy and its subsidiaries enter into these arrangements to facilitate
commercial transactions with third parties by enhancing the value of the
transaction to the third party. At December 31, 2012, Duke Energy and its
subsidiaries do not believe conditions are likely for signifi cant performance
under these guarantees. To the extent liabilities are incurred as a result of
the activities covered by the guarantees, such liabilities are included on the
accompanying Consolidated Balance Sheets.
On January 2, 2007, Duke Energy completed the spin-off of its natural
gas businesses to shareholders. Guarantees that were issued by Duke Energy
or its affi liates, or were assigned to Duke Energy prior to the spin-off, remained
with Duke Energy subsequent to the spin-off. Guarantees issued by Spectra
Energy Capital, LLC, formerly known as Duke Capital LLC, (Spectra Capital) or
its affi liates prior to the spin-off remained with Spectra Capital subsequent to
the spin-off, except for guarantees that were later assigned to Duke Energy.
Duke Energy has indemnifi ed Spectra Capital against any losses incurred
under certain of the guarantee obligations that remain with Spectra Capital.
At December 31, 2012, the maximum potential amount of future payments
associated with these guarantees was $141 million, the majority of which
expires by 2028.
Duke Energy has issued performance guarantees to customers and other
third parties that guarantee the payment and performance of other parties,
including certain non-wholly owned entities, as well as guarantees of debt of
certain non-consolidated entities and less than wholly owned consolidated
entities. If such entities were to default on payments or performance, Duke
Energy would be required under the guarantees to make payments on the
obligations of the less than wholly owned entity. The maximum potential amount
of future payments Duke Energy could have been required to make under
these guarantees as of December 31, 2012, was $243 million. Of this amount,
$44 million relates to guarantees issued on behalf of less than wholly owned