Duke Energy : 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to ________________________

Registrant, State of Incorporation or Organization,

Commission file number

Address of Principal Executive Offices and Telephone Number

1-32853

DUKE ENERGY CORPORATION

(a Delaware corporation)

550 South Tryon Street Charlotte, North Carolina 28202-1803 704-382-3853

Commission file numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS

Employer Identification NumberCommission file number

IRS Employer Identification No.

20-2777218

Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number

1-4928

DUKE ENERGY CAROLINAS, LLC (a North Carolina limited liability company)

526 South Church Street Charlotte, North Carolina 28202-1803 704-382-3853 56-0205520

1-3274

DUKE ENERGY FLORIDA, LLC (a Florida limited liability company)

299 First Avenue North

St. Petersburg, Florida 33701 704-382-3853 59-0247770

1-15929

PROGRESS ENERGY, INC.

(a North Carolina corporation) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-2155481

1-1232

DUKE ENERGY OHIO, INC.

(an Ohio corporation)

139 East Fourth Street

Cincinnati, Ohio 45202

704-382-3853

31-0240030

1-3382

DUKE ENERGY PROGRESS, LLC (a North Carolina limited liability company)

410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-0165465

1-3543

DUKE ENERGY INDIANA, LLC (an Indiana limited liability company)

1000 East Main Street Plainfield, Indiana 46168 704-382-3853 35-0594457

1-6196

PIEDMONT NATURAL GAS COMPANY, INC.

(a North Carolina corporation)

4720 Piedmont Row Drive

Charlotte, North Carolina 28210

704-364-3120

56-0556998

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Duke Energy Corporation (Duke Energy)	Yes x	No ¨	Duke Energy Florida, LLC (Duke Energy Florida)	Yes x	No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)	Yes x	No ¨	Duke Energy Ohio, Inc. (Duke Energy Ohio)	Yes x	No ¨
Progress Energy, Inc. (Progress Energy)	Yes x	No ¨	Duke Energy Indiana, LLC (Duke Energy Indiana)	Yes x	No ¨
Duke Energy Progress, LLC (Duke Energy Progress)	Yes x	No ¨	Piedmont Natural Gas Company, Inc. (Piedmont)	Yes x	No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Duke Energy	Yes x	No ¨	Duke Energy Florida	Yes x	No ¨
Duke Energy Carolinas	Yes x	No ¨	Duke Energy Ohio	Yes x	No ¨
Progress Energy	Yes x	No ¨	Duke Energy Indiana	Yes x	No ¨
Duke Energy Progress	Yes x	No ¨	Piedmont	Yes x	No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Smaller reporting company Emerging Growth

Duke Energy

Large accelerated filer xAccelerated filer ¨

Non-accelerated filer ¨

¨

Company ¨

Smaller reporting company Emerging Growth

Duke Energy Carolinas

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

¨

Company ¨

Smaller reporting company Emerging Growth

Progress Energy

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

¨

Company ¨

Smaller reporting company Emerging Growth

Duke Energy Progress

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

¨

Company ¨

Smaller reporting company Emerging Growth

Duke Energy Florida

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

¨

Company ¨

Smaller reporting company Emerging Growth

Duke Energy Ohio

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

¨

Company ¨

Smaller reporting company Emerging Growth

Duke Energy Indiana

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

¨

Company ¨

Smaller reporting company Emerging Growth

Piedmont

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

¨

Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Duke Energy	Yes ¨	No x	Duke Energy Florida	Yes ¨	No x
Duke Energy Carolinas	Yes ¨	No x	Duke Energy Ohio	Yes ¨	No x
Progress Energy	Yes ¨	No x	Duke Energy Indiana	Yes ¨	No x
Duke Energy Progress	Yes ¨	No x	Piedmont	Yes ¨	No x

Number of shares of Common stock outstanding at July 31, 2018:

Registrant	Description	Shares
Duke Energy	Common stock, $0.001 par value	712,354,724

This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.

TABLE OF CONTENTS

Cautionary Statement Regarding Forward-Looking Information

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
Duke Energy Corporation Financial Statements	6
Duke Energy Carolinas, LLC Financial Statements	11
Progress Energy, Inc. Financial Statements	15
Duke Energy Progress, LLC Financial Statements	19
Duke Energy Florida, LLC Financial Statements	23
Duke Energy Ohio, Inc. Financial Statements	27
Duke Energy Indiana, LLC Financial Statements	31
Piedmont Natural Gas Company, Inc. Financial Statements	35
Combined Notes to Condensed Consolidated Financial Statements
Note 1 - Organization and Basis of Presentation	39
Note 2 - Business Segments	43
Note 3 - Regulatory Matters	46
Note 4 - Commitments and Contingencies	56
Note 5 - Debt and Credit Facilities	61
Note 6 - Asset Retirement Obligations	62
Note 7 - Goodwill	63
Note 8 - Related Party Transactions	64
Note 9 - Derivatives and Hedging	65
Note 10 - Investments in Debt and Equity Securities	71
Note 11 - Fair Value Measurements	77
Note 12 - Variable Interest Entities	85
Note 13 - Revenue	89
Note 14 - Common Stock	94
Note 15 - Stock-Based Compensation	95
Note 16 - Employee Benefit Plans	96
Note 17 - Income Taxes	100
Note 18 - Subsequent Events	101
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	102
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	129
Item 4.	Controls and Procedures	129
Item 1.	130
Item 1A.	130
Item 2.	130
Item 6.	131
134

PART II. OTHER INFORMATION

Legal Proceedings

Risk Factors

Unregistered Sales of Equity Securities and Use of Proceeds

Exhibits

Signatures

CAUTIONARY STATEMENT REGARDING 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 and can often be identified by terms and phrases that include "anticipate," "believe," "intend," "estimate," "expect," "continue," "should," "could," "may," "plan," "project," "predict," "will," "potential," "forecast," "target," "guidance," "outlook" or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:

• ◦ State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to 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 costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;

• ◦ The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;

• ◦ The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;

• ◦ 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 sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies;

• ◦ Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;

• ◦ Advancements in technology;

• ◦ Additional competition in electric and natural gas markets and continued industry consolidation;

• ◦ The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;

• ◦ The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;

• ◦ The ability to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business;

• ◦ Operational interruptions to our natural gas distribution and transmission activities;

• ◦ The availability of adequate interstate pipeline transportation capacity and natural gas supply;

• ◦ The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches and other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;

• ◦ The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;

• ◦ The timing and extent of changes in commodity prices and interest 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, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions;

• ◦ Credit ratings of the Duke Energy Registrants may be different from what is expected;

• ◦ 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 the Duke Energy Registrants' capital investment projects, 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;