Duke Energy 2015 Annual Report Download - page 136

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PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. •
DUKE ENERGY PROGRESS, LLC. • DUKE ENERGY FLORIDA, LLC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
Duke Energy Ohio
Years Ended December 31,
(in millions) 2015 2014 2013
Operating Revenues $ 412 $ 1,299 $ 1,503
Loss on disposition(a) (52) (959) —
Income (loss) before income taxes(b) $ 44 $ (863) $ 67
Income tax expense (benefit) 21 (300) 32
Income (Loss) From Discontinued Operations,
net of tax $ 23 $ (563) $ 35
(a) The Loss on disposition includes impairments recorded to adjust the carrying amount of the assets to the
estimated fair value of the business, based on the selling price to Dynegy less cost to sell.
(b) The Income (loss) before income taxes includes the pretax impact of an $81 million charge for the
settlement agreement reached in a lawsuit related to the Disposal Group for the year ended December 31,
2015, respectively. Refer to Note 5 for further information related to the lawsuit.
Commercial Portfolio has a revolving credit agreement (RCA) which
was used to support the operations of the nonregulated Midwest generation
business. Interest expense associated with the RCA was allocated to
discontinued operations. No other interest expense related to corporate level
debt was allocated to discontinued operations.
Duke Energy Ohio had a power purchase agreement with the Disposal
Group for a portion of its standard service offer (SSO) supply requirement.
The agreement and the SSO expired in May 2015. Duke Energy received
reimbursement for transition services provided to Dynegy through December
2015. The continuing cash flows were not considered direct cash flows or
material. Duke Energy or Duke Energy Ohio did not significantly influence the
operations of the Disposal Group during the transition service period.
See Notes 4 and 5 for a discussion of contingencies related to the
Disposal Group that are retained by Duke Energy Ohio subsequent to the sale.
3. BUSINESS SEGMENTS
Duke Energy evaluates segment performance based on segment income.
Segment income is defined 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. Certain governance costs are allocated
to each segment. In addition, direct interest expense and income taxes are
included in segment income.
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 affiliate 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 Portfolio.
Regulated Utilities conducts electric and natural gas operations that are
substantially all regulated and, accordingly, qualify for regulatory accounting
treatment. These operations are primarily conducted through the Subsidiary
Registrants and are subject to the rules and regulations of the FERC, NRC,
NCUC, PSCSC, FPSC, PUCO, IURC and KPSC.
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 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. On February 4, 2016, Duke Energy announced
it had initiated a process to divest its International Energy business segment,
excluding the investment in NMC. See Note 2 for further information.
Commercial Portfolio builds, develops and operates wind and solar
renewable generation and energy transmission projects throughout the U.S.
The segment was renamed as a result of the sale of the Disposal Group, as
discussed in Note 2. For periods subsequent to the sale, beginning in the second
quarter of 2015, certain immaterial results of operations and related assets
previously presented in the Commercial Portfolio segment are presented in
Regulated Utilities and Other.
The remainder of Duke Energy’s operations is presented as Other, which
is primarily comprised of unallocated corporate interest expense, unallocated
corporate costs, contributions to the Duke Energy Foundation and the operations
of Duke Energy’s wholly owned captive insurance subsidiary, Bison Insurance
Company Limited (Bison). On December 31, 2013, Duke Energy sold its interest
in DukeNet Communications Holdings, LLC (DukeNet) to Time Warner Cable, Inc.