Duke Energy 2013 Annual Report Download - page 127

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PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. •
DUKE ENERGY PROGRESS, INC. • DUKE ENERGY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
sales of other assets on Duke Energy Ohio’s Consolidated Statements of Cash
Flows. Cash paid to Duke Energy Ohio is included in Capital expenditures
on Duke Energy Indiana’s Consolidated Statements of Cash Flows. Duke
Energy Ohio and Duke Energy Indiana recognized non-cash equity transfers of
$28 million and $26 million, respectively, in their Consolidated Statements of
Common Stockholder’s Equity on the transaction representing the difference
between cash exchanged and the net book value of Vermillion. These amounts
are not reected in Duke Energy’s Consolidated Statements of Cash Flows
or Consolidated Statements of Equity as the transaction is eliminated in
consolidation.
Proceeds from WVPA are included in Net proceeds from the sales of other
assets, and sale of and collections on notes receivable on Duke Energy’s and
Duke Energy Ohio’s Consolidated Statements of Cash Flows. The sale of the
proportionate share of Vermillion to WVPA did not result in a signicant gain or
loss upon close of the transaction.
Wind Projects Joint Venture
In April 2012, Duke Energy executed a joint venture agreement with
Sumitomo Corporation of America (SCOA). Under terms of the agreement,
Duke Energy and SCOA each own a 50 percent interest in the joint venture (DS
Cornerstone, LLC), which owns two wind generation projects. Duke Energy and
SCOA also negotiated a $330 million, Construction and 12-year amortizing
Term Loan Facility, on behalf of the borrower, a wholly owned subsidiary of the
joint venture. The loan agreement is non-recourse to Duke Energy. Duke Energy
received proceeds of $319 million upon execution of the loan agreement. This
amount represents reimbursement of a signicant portion of Duke Energy’s
construction costs incurred as of the date of the agreement. DS Cornerstone,
LLC was initially consolidated with the sale to SCOA because of a guarantee
provided by an indirect wholly owned subsidiary of Duke Energy. With the
expiration of the guarantee in 2012, DS Cornerstone, LLC was deconsolidated.
SALES OF OTHER ASSETS
During 2012, Duke Energy received proceeds of $187 million from the sale
of non-core business assets within the Commercial Power segment for which no
material gain or loss was recognized.
3. BUSINESS SEGMENTS
Duke Energy evaluates segment performance based on segment income.
Segment income is dened as income from continuing operations net of income
attributable to noncontrolling interests. Segment income, as discussed below,
includes intercompany revenues and expenses that are eliminated in the
Consolidated Financial Statements.
Operating segments are determined based on information used by the
chief operating decision maker in deciding how to allocate resources and
evaluate the performance.
Products and services are sold between afliate companies and reportable
segments of Duke Energy at cost. Segment assets as presented in the tables that
follow exclude all intercompany assets.
DUKE ENERGY
Duke Energy has the following reportable operating segments: Regulated
Utilities, International Energy and Commercial Power.
Regulated Utilities conducts operations primarily through Duke Energy
Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy
Indiana, and the regulated transmission and distribution operations of Duke Energy
Ohio. These electric and gas operations are subject to the rules and regulations
of the FERC, NCUC, PSCSC, FPSC, PUCO, IURC, and KPSC. Substantially all of
Regulated Utilities’ operations are regulated and, accordingly, these operations
qualify for regulatory accounting treatment.
International Energy principally operates and manages power generation
facilities and engages in sales and marketing of electric power, natural gas, and
natural gas liquids outside the U.S. Its activities principally target power generation
in Latin America. Additionally, International Energy owns a 25 percent interest in
National Methanol Company (NMC), a large regional producer of Methyl tertiary
butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accounted for
under the equity method of accounting.
Commercial Power owns, operates and manages power plants and
engages in the wholesale marketing and procurement of electric power, fuel and
emission allowances related to these plants as well as other contractual positions.
Commercial Power’s generation operations consist primarily of Duke Energy Ohio’s
coal-red and gas-red nonregulated generation assets located in the Midwest
region of the U.S. and wind and solar generation located throughout the U.S. The
asset portfolio has a diversied fuel mix with baseload and mid-merit coal-red
units as well as combined cycle and peaking natural gas-red units. In addition,
Commercial Power operates and develops transmission projects.
The remainder of Duke Energy’s operations is presented as Other. While
it is not an operating segment, Other primarily includes unallocated corporate
interest expense, certain unallocated corporate costs, Bison Insurance Company
Limited (Bison), Duke Energy’s wholly owned, captive insurance subsidiary, and
contributions to the Duke Energy Foundation. On December 31, 2013, Duke Energy
sold its interest in DukeNet Communications Holdings, LLC (DukeNet) to Time
Warner Cable, Inc. See Note 12 for further information.