Duke Energy 2012 Annual Report Download - page 82

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PART II
See Note 7 to the Consolidated Financial Statements, “Guarantees and
Indemnifi cations,” 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 fl ows or fi nancial position.
Other than the guarantee arrangements discussed above and normal
operating lease arrangements, Duke Energy does not have any material
off-balance sheet fi nancing 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 specifi ed periods, based on certain specifi ed minimum quantities and prices. The
following table summarizes Duke Energy’s contractual cash obligations as of December 31, 2012.
Payments Due By Period
(in millions) Total
Less than
1 year (2013)
2-3 years
(2014 & 2015)
4-5 years
(2016 & 2017)
More than 5 years
(2018 & beyond)
Long-term debt(a) $35,461 $ 2,974 $ 4,472 $ 3,285 $24,730
Interest payments on long-term debt(b) 23,031 1,671 2,922 2,585 15,853
Capital leases(c) 2,713 210 361 363 1,779
Operating leases(c) 1,682 171 295 235 981
Purchase obligations:(d)
Fuel and purchased power(e) 24,860 5,011 6,871 3,319 9,659
Other purchase obligations(f) 3,271 1,338 817 251 865
Uncertain tax positions(g) — ——— —
Nuclear decommissioning trust annual funding(h) 1,712 92 183 183 1,254
Total contractual cash obligations(i) $92,730 $11,467 $15,921 $10,221 $55,121
(a) See Note 6 to the Consolidated Financial Statements, “Debt and Credit Facilities.”
(b) Interest payments on variable rate debt instruments were calculated using current interest rates and holding them constant for the life of the instruments.
(c) 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 stated in the lease
agreements and exclude certain related executory costs.
(d) Current liabilities, except for current maturities of long-term debt, and purchase obligations refl ected in the Consolidated Balance Sheets, have been excluded from the above table.
(e) Includes contractual obligations to purchase physical quantities of electricity, coal, nuclear fuel and limestone, including a total of $195 million for nuclear fuel contractual obligations related to Crystal River Unit 3. Also
includes fi rm capacity payments that provide Duke Energy with uninterrupted fi rm access to electricity transmission capacity and natural gas transportation contracts, as well as 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 market prices at December 31, 2012. For certain of these amounts, Duke Energy may settle on
a net cash basis since Duke Energy has entered into payment netting arrangements with counterparties that permit Duke Energy to offset receivables and payables with such counterparties.
(f) 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 nonregulated 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 and Progress Energy Florida’s engineering,
procurement and construction agreement for Levy. See Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies” for further discussion of the Levy engineering, procurement and construction
agreement.
(g) Uncertain tax positions of $540 million are not refl ected in this table as Duke Energy cannot predict when open income tax years will close with completed examinations. See Note 24 to the Consolidated Financial Statements,
“Income Taxes.”
(h) Related to future annual funding obligations to nuclear decommissioning trust fund (NDTF) through nuclear power stations’ re-licensing dates. Amounts through 2017 include $13 million per year for North Carolina
jurisdictional amounts that Progress Energy Carolinas retained internally and is transitioning to its external decommissioning funds per a 2008 NCUC order. The transition of the original $131 million must be complete by
December 31, 2017, and at least 10 percent must be transitioned each year. See Note 9 to the Consolidated Financial Statements, “Asset Retirement Obligations.”
(i) The table above excludes reserves for litigation, environmental remediation, asbestos-related injuries and damages claims and self-insurance claims (see Note 5 to the Consolidated Financial Statements, “Commitments
and Contingencies”) because Duke Energy is uncertain as to the timing of when cash payments will be required. Additionally, the table above excludes annual insurance premiums that are necessary to operate the business,
including nuclear insurance (see Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies”), funding of pension and other post-retirement benefi t plans (see Note 23 to the Consolidated Financial
Statements, “Employee Benefi t Plans”), asset retirement obligations (see Note 9 to the Consolidated Financial Statements, “Asset Retirement Obligations”) and regulatory liabilities (see Note 4 to the Consolidated Financial
Statements, “Regulatory Matters”) because the amount and timing of the cash payments are uncertain. Also excluded are Deferred Income Taxes and Investment Tax Credits recorded on the Consolidated Balance Sheets since
cash payments for income taxes are determined based primarily on taxable income for each discrete fi scal year.
Quantitative and Qualitative Disclosures About Market Risk
Risk Management Policies.
The Duke Energy Registrants are exposed to market risks associated
with commodity prices, credit quality, interest rates, equity prices and foreign
currency exchange rates. Management has established comprehensive risk
management policies to monitor and manage these market risks. Duke Energy’s
Chief Executive Offi cer and Chief Financial Offi cer are responsible for the overall
approval of market risk management policies and the delegation of approval
and authorization levels. The Finance and Risk Management Committee of the
Board of Directors receives periodic updates from the Chief Risk Offi cer and
other members of management on market risk positions, corporate exposures,
credit exposures and overall risk management activities. The Chief Risk Offi cer
is responsible for the overall governance of managing credit risk and commodity
price risk, including monitoring exposure limits.
The following disclosures about market risk contain forward-looking
statements that involve estimates, projections, goals, forecasts, assumptions,
risks and uncertainties that could cause actual results or outcomes to differ
materially from those expressed in the forward-looking statements. Please
review Item 1A, “Risk Factors,” and “Safe Harbor for Forward-Looking
Statements” for a discussion of the factors that may impact any such forward-
looking statements made herein.
The risks discussed below do not include the price risks associated with
nonfi nancial instrument transactions and positions associated with the Duke
Energy Registrants’ operations, such as purchase and sales commitments and
inventory.