Duke Energy 2014 Annual Report Download - page 17

FORWARD-LOOKING INFORMATION
This document includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are based on
management’s beliefs and assumptions. These forward-looking statements
are identified by terms and phrases such as “anticipate,” “believe,” “intend,”
“estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,”
“predict,” “will,” “potential,” “forecast,” “target,” “outlook,” “guidance,” and
similar expressions. Forward-looking statements involve risks and uncertainties
that may cause actual results to be materially different from the results
predicted. Factors that could cause actual results to differ materially from
those indicated in any forward-looking statement include, but are not limited
to: state, federal and foreign legislative and regulatory initiatives, including
costs of compliance with existing and future environmental requirements or
climate change, as well as rulings that affect cost and investment recovery
or have an impact on rate structures or market prices; the extent and timing
of the costs and liabilities relating to the Dan River ash basin release and
compliance with current and any future regulatory changes related to the
management of coal ash; the ability to recover eligible costs, including those
associated with future significant weather events, and earn an adequate return
on investment through the regulatory process; the risk that the credit ratings
of the company or its subsidiaries may be different from what the companies
expect; costs and effects of legal and administrative proceedings, settlements,
investigations and claims; industrial, commercial and residential growth or
decline in service territories or customer bases resulting from customer usage
patterns, including energy efficiency efforts and use of alternative energy
sources including self-generation and distributed generation technologies;
additional competition in electric markets and continued industry consolidation;
political and regulatory uncertainty in other countries in which Duke Energy
conducts business; the influence of weather and other natural phenomena on
operations, including the economic, operational and other effects of severe
storms, hurricanes, droughts and tornadoes; the ability to successfully operate
electric generating facilities and deliver electricity to customers; the impact
on facilities and business from a terrorist attack, cybersecurity threats, data
security breaches and other catastrophic events; the inherent risks associated
with the operation and potential construction of nuclear facilities, including
environmental, health, safety, regulatory and financial risks; the timing and
extent of changes in commodity prices, interest rates and foreign currency
exchange rates and the ability to recover such costs through the regulatory
process, where appropriate, and their impact on liquidity positions and the
value of underlying assets; the results of financing efforts, including the ability
to obtain financing on favorable terms, which can be affected by various
factors, including credit ratings and general economic conditions; declines
in the market prices of equity and fixed income securities and resultant cash
funding requirements for defined benefit pension plans, other post-retirement
benefit plans, and nuclear decommissioning trust funds; construction and
development risks associated with the completion of Duke Energy and its
subsidiaries’ capital investment projects in existing and new generation
facilities, including risks related to financing, obtaining and complying with
terms of permits, meeting construction budgets and schedules, and satisfying
operating and environmental performance standards, as well as the ability to
recover costs from customers in a timely manner or at all; changes in rules for
regional transmission organizations, including changes in rate designs and new
and evolving capacity markets, and risks related to obligations created by the
default of other participants; the ability to control operation and maintenance
costs; the level of creditworthiness of counterparties to transactions; employee
workforce factors, including the potential inability to attract and retain key
personnel; the ability of subsidiaries to pay dividends or distributions to Duke
Energy Corporation holding company (the Parent); the performance of projects
undertaken by our nonregulated businesses and the success of efforts to invest
in and develop new opportunities; the effect of accounting pronouncements
issued periodically by accounting standard-setting bodies; the impact of
potential goodwill impairments; the ability to reinvest prospective undistributed
earnings of foreign subsidiaries or repatriate such earnings on a tax-efficient
basis; and the ability to successfully complete future merger, acquisition or
divestiture plans.
Additional risks and uncertainties are identified and discussed in Duke
Energy’s and its subsidiaries’ reports filed with the SEC and available at
the SEC’s website at www.sec.gov. In light of these risks, uncertainties and
assumptions, the events described in the forward-looking statements might not
occur or might occur to a different extent or at a different time than Duke Energy
has described. Duke Energy undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
NON-GAAP MEASURES
Adjusted Earnings, Adjusted Diluted Earnings per Share (“EPS”)
and Adjusted Segment Income
Duke Energy’s 2014 Annual Report references 2014 adjusted earnings of
$3,218 million and adjusted diluted EPS of $4.55.
Management evaluates financial performance in part based on the
non-GAAP financial measures, adjusted earnings and adjusted diluted EPS.
These items are measured as income from continuing operations net of income
(loss) attributable to noncontrolling interests, adjusted for the dollar and per
share impact of mark-to-market impacts of economic hedges in the Commercial
Power segment and special items including the operating results of the Disposal
Group classified as discontinued operations for GAAP purposes. Special items
represent certain charges and credits, which management believes will not be
recurring on a regular basis, although it is reasonably possible such charges
and credits could recur. As result of the agreement in August 2014 to sell the
Disposal Group to Dynegy, the operating results of the Disposal Group are
classified as discontinued operations, including a portion of the mark-to-market
adjustments associated with derivative contracts. Management believes that
including the operating results of the Disposal Group classified as discontinued
operations better reflects its financial performance and therefore has included
these results in adjusted earnings and adjusted diluted EPS. Derivative
contracts are used in Duke Energy’s hedging of a portion of the economic value
of its generation assets in the Commercial Power segment. The mark-to-market
impact of derivative contracts is recognized in GAAP earnings immediately and,
if associated with the Disposal Group, classified as discontinued operations,
as such derivative contracts do not qualify for hedge accounting or regulatory
treatment. The economic value of generation assets is subject to fluctuations
in fair value due to market price volatility of input and output commodities
(e.g., coal, electricity, natural gas). Economic hedging involves both purchases
and sales of those input and output commodities related to generation assets.
Operations of the generation assets are accounted for under the accrual method.
Management believes excluding impacts of mark-to-market changes of the