Duke Energy 2012 Annual Report Download - page 273

PART II
253
DUKE ENERGY CORPORATION
Schedule I — Condensed Parent Company Notes to 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 specifi ed 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. As a condition
to the Duke Energy and Progress Energy merger approval, the NCUC and the
PSCSC imposed conditions (the Progress Merger Conditions) on the ability
of Duke Energy Carolinas, and Progress Energy Carolinas to transfer funds
to Duke Energy through loans or advances, as well as restricted amounts
available to pay dividends to Duke Energy. For further information, see Note 4
to the Consolidated Financial Statements, “Regulatory Matters.” Accordingly,
these condensed fi nancial 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 fi nancial
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 fi nancial statements. Because these parent-only fi nancial statements
and notes do not include all of the information and footnotes required by
GAAP in the U.S. for annual fi nancial statements, these parent-only fi nancial
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, 2012.
Duke Energy and its subsidiaries fi le a consolidated federal income tax
return and other state and foreign jurisdictional returns as required. The taxable
income of Duke Energy’s wholly owned operating subsidiaries is refl ected 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 benefi ts to the wholly owned
operating subsidiaries whose investments or results of operations provide these
tax expenses and benefi ts. 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 fi ling its own tax return as a C-Corporation.
2. DEBT
The following table summarizes Duke Energy’s outstanding debt.
Summary of Debt and Related Terms
Weighted-
Average
Rate
December 31,
(in millions) Year Due 2012 2011
Unsecured debt 4.1 % 2013 – 2026 $4,929 $3,773
Capital leases 7.8 % 2046 127 —
Intercompany borrowings(a) 0.5 % 2021 105 105
Notes payable and commercial paper(b) 0.5 % 1,195 604
Total debt 6,356 4,482
Short-term notes payable and commercial
paper (745) (154)
Current maturities of long-term debt (256) —
Total long-term debt $5,355 $4,328
(a) This amount represents an intercompany loan with Duke Energy’s affi liate, Bison Insurance Company
Limited.
(b) Includes $450 million at December 31, 2012 and 2011 that was classifi ed as Long-term Debt on the
Condensed 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 refi nance these balances on
a long-term basis. The weighted-average days to maturity was 18 days and 17 days as of December 31,
2012 and 2011, respectively.
At December 31, 2012, Duke Energy has guaranteed $734 million of
debt issued by Duke Energy Carolinas, LLC, one of Duke Energy’s wholly owned
operating subsidiaries.
On November 13, 2012, Duke Energy fi led a prospectus supplement to
the September 2010 Form S-3 with the SEC, to sell up to $1 billion of fi xed or
variable rate unsecured senior notes, called InterNotes, due 1 year to 30 years
from the date of issuance. The InterNotes will be issued as direct, unsecured
and unsubordinated obligations of Duke Energy Corporation. The net proceeds
from the sale of InterNotes will be used to fund capital expenditures in our
unregulated businesses and for general corporate purposes. The balance as of
December 31, 2012 is $36 million, with maturities ranging from 10 to 14 years.
The notes are long-term debt obligations of Duke Energy and are refl ected as
Long-term debt on Duke Energy’s Consolidated Balance Sheets.
On April 4, 2011, Duke Energy fi led a Form S-3 with the SEC to sell
up to $1 billion of variable denomination fl oating 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 fl oating 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 are non-
transferable and may be redeemed in whole or in part at the investor’s option.
Proceeds from the sale of the notes will be used for general corporate purposes.
The balance as of December 31, 2012 and December 31, 2011, was $395 million
and $79 million, respectively. The notes are a short-term debt obligation of
Duke Energy and are refl ected as Notes payable and commercial paper on Duke
Energy’s Consolidated Balance Sheets.