Duke Energy 2013 Annual Report Download - page 192

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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)
CRC
On a revolving basis, CRC buys certain accounts receivable arising
from the sale of electricity and/or related services from Duke Energy Ohio
and Duke Energy Indiana. Receivables sold are securitized by CRC through a
facility managed by two unrelated third parties and are used as collateral for
commercial paper issued by the unrelated third parties. Proceeds Duke Energy
Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are
typically 75 percent cash and 25 percent in the form of a subordinated note
from CRC. The subordinated note is a retained interest in the receivables sold.
Cash collections from the receivable are the sole source of funds to satisfy the
related debt obligation. Depending on experience with collections, additional
equity infusions to CRC may be required by Duke Energy to maintain a minimum
equity balance of $3 million. There were no infusions to CRC during the years
ended December 31, 2013 and 2012. For the year ended December 31,
2011, Duke Energy infused $6 million of equity to CRC to remedy net worth
deficiencies. Borrowings fluctuate based on the amount of receivables sold. The
credit facility expires in November 2016. The secured credit facility is reflected
on the Consolidated Balance Sheets as Long-term Debt. CRC is considered a
VIE because (i) equity capitalization is insufficient to support its operations,
(ii) power to direct the most significant activities that impact economic
performance of the entity are not performed by the equity holder, Cinergy, and
(iii) deficiencies in net worth of CRC are not funded by Cinergy, but by Duke
Energy. The most significant activity of CRC relates to the decisions made with
respect to the management of delinquent receivables. Duke Energy consolidates
CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy
Indiana consolidate CRC.
CinCap V
CinCap V was created to finance and execute a power sale agreement
with Central Maine Power Company for approximately 35 MW of capacity and
energy. This agreement expires in 2016. CinCap V is considered a VIE because
the equity capitalization is insufficient to support its operations. Duke Energy
consolidates CinCap V as it has power to direct the most significant activities
that impact the economic performance of the entity, which are the decisions to
hedge and finance the power sales agreement.
Renewables
Certain of Duke Energy’s renewable energy facilities are VIEs due to
power purchase agreements with terms that approximate the expected life of
the projects. These fixed price agreements effectively transfer commodity price
risk to the buyer of the power. Certain other of Duke Energy’s renewable energy
facilities are VIEs due to Duke Energy issuing guarantees for debt service and
operations and maintenance reserves in support of debt financings. Assets are
restricted and cannot be pledged as collateral or sold to third parties without prior
approval of debt holders. The most significant activities that impact the economic
performance of these renewable energy facilities were decisions associated with
siting, negotiating purchase power agreements, engineering, procurement and
construction, and decisions associated with ongoing operations and maintenance-
related activities. Duke Energy consolidated the entities as it makes all of these
decisions.
NON-CONSOLIDATED VIEs
The tables below disclose VIEs the Duke Energy Registrants do not consolidate and how these entities impact the Duke Energy Registrants’ respective
Consolidated Balance Sheets.
December 31, 2013
Duke Energy
(in millions) Renewables Other Total
Duke
Energy
Ohio(a)
Duke
Energy
Indiana(b)
Receivables $ — $ — $ — $114 $143
Investments in equity method unconsolidated affiliates 153 60 213 — —
Intangibles — 96 96 96 —
Investments and other assets — 4 4 — —
Total assets 153 160 313 210 143
Other current liabilities — 3 3 ——
Deferred credits and other liabilities — 15 15 — —
Total liabilities — 18 18 — —
Net assets $ 153 $142 $295 $210 $143
(a) Reflects OVEC and retained interest in CRC.
(b) Reflects retained interest in CRC.