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Duke Energy Corporation 10-Q 2010

Documents found in this filing:

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2010

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

For the transition period from to


Commission file number	Exact name of registrants as specified in their charters, addresses of principal executive offices, telephone numbers and states of incorporation	IRS Employer Identification No.
1-32853	DUKE ENERGY CORPORATION 526 South Church Street Charlotte, NC 28202-1803 704-594-6200 State of Incorporation: Delaware	20-2777218

1-4928	DUKE ENERGY CAROLINAS, LLC 526 South Church Street Charlotte, NC 28202-1803 704-594-6200 State of Incorporation: North Carolina	56-0205520

1-1232	DUKE ENERGY OHIO, INC. 139 East Fourth Street Cincinnati, OH 45202 704-594-6200 State of Incorporation: Ohio	31-0240030

1-3543	DUKE ENERGY INDIANA, INC. 1000 East Main Street Plainfield, IN 46168 704-594-6200 State of Incorporation: Indiana	35-0594457

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 Carolinas, LLC (Duke Energy Carolinas) Yes x No ¨

Duke Energy Ohio, Inc. (Duke Energy Ohio) Yes x No ¨

Duke Energy Indiana, Inc. (Duke Energy Indiana) 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 Carolinas Yes x No ¨

Duke Energy Ohio Yes x No ¨

Duke Energy Indiana Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Duke Energy	Large accelerated filer	x	Accelerated filer	¨
	Non-accelerated filer	¨	Smaller reporting company	¨

Duke Energy Carolinas	Large accelerated filer	¨	Accelerated filer	¨
	Non-accelerated filer	x	Smaller reporting company	¨

Duke Energy Ohio	Large accelerated filer	¨	Accelerated filer	¨
	Non-accelerated filer	x	Smaller reporting company	¨

Duke Energy Indiana	Large accelerated filer	¨	Accelerated filer	¨
	Non-accelerated filer	x	Smaller reporting company	¨

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 Carolinas Yes ¨ No x

Duke Energy Ohio Yes ¨ No x

Duke Energy Indiana Yes ¨ No x

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date.


Outstanding as of October 29, 2010 Registrant	Description	Shares

Duke Energy	Common Stock, par value $0.001		1,324,548,714

Duke Energy Carolinas	All of the registrant’s limited liability company member interests are directly owned by Duke Energy.

Duke Energy Ohio	All of the registrant’s common stock is indirectly owned by Duke Energy.

Duke Energy Indiana	All of the registrant’s common stock is indirectly owned by Duke Energy.

This combined Form 10-Q is filed separately by four registrants: Duke Energy, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana (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, Duke Energy Ohio and Duke Energy Indiana 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.

INDEX

FORM 10-Q FOR THE QUARTER ENDED

SEPTEMBER 30, 2010


		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements		3

	Duke Energy Corporation (Duke Energy)

	Unaudited Condensed Consolidated Statements of Operations		3

	Unaudited Condensed Consolidated Balance Sheets		4

	Unaudited Condensed Consolidated Statements of Cash Flows		6

	Unaudited Condensed Consolidated Statements of Equity and Comprehensive Income		7

	Duke Energy Carolinas, LLC (Duke Energy Carolinas)

	Unaudited Condensed Consolidated Statements of Operations		8

	Unaudited Condensed Consolidated Balance Sheets		9

	Unaudited Condensed Consolidated Statements of Cash Flows		11

	Unaudited Condensed Consolidated Statements of Member’s Equity and Comprehensive Income		12

	Duke Energy Ohio, Inc. (Duke Energy Ohio)

	Unaudited Condensed Consolidated Statements of Operations		13

	Unaudited Condensed Consolidated Balance Sheets		14

	Unaudited Condensed Consolidated Statements of Cash Flows		16

	Unaudited Condensed Consolidated Statements of Common Stockholder’s Equity and Comprehensive Income (Loss)		17

	Duke Energy Indiana, Inc. (Duke Energy Indiana)

	Unaudited Condensed Consolidated Statements of Operations		18

	Unaudited Condensed Consolidated Balance Sheets		19

	Unaudited Condensed Consolidated Statements of Cash Flows		21

	Unaudited Condensed Consolidated Statements of Common Stockholder’s Equity and Comprehensive Income		22

	Combined Notes to Unaudited Condensed Consolidated Financial Statements for Duke Energy, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana		23

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		79

3.	Quantitative and Qualitative Disclosures About Market Risk		93

4.	Controls and Procedures		94

PART II. OTHER INFORMATION

1.	Legal Proceedings		95

1A.	Risk Factors		95

2.	Unregistered Sales of Equity Securities and Use of Proceeds		95

4.	Submission of Matters to a Vote of Security Holders		95

6.	Exhibits		96

	Signatures		97

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. These forward-looking statements, which are intended to cover Duke Energy and the applicable Duke Energy Registrants, are identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” 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, as well as rulings that affect cost and investment recovery or have an impact on rate structures;

•

Costs and effects of legal and administrative proceedings, settlements, investigations and claims;

•

Industrial, commercial and residential growth or decline in the respective Duke Energy Registrants’ service territories, customer base or customer usage patterns;

•

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 each of the Duke Energy Registrants’ operations, including the economic, operational and other effects of storms, hurricanes, droughts and tornadoes;

•

The timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates;

•

Unscheduled generation outages, unusual maintenance or repairs and electric transmission system constraints;

•

The performance of electric generation facilities and of projects undertaken by Duke Energy’s non-regulated businesses;

•

The results of financing efforts, including the Duke Energy Registrants’ ability to obtain financing on favorable terms, which can be affected by various factors, including the respective Duke Energy Registrants’ credit ratings and general economic conditions;

•

Declines in the market prices of equity securities and resultant cash funding requirements for Duke Energy’s defined benefit pension plans;

•

The level of creditworthiness of counterparties to Duke Energy Registrants’ transactions;

•

Employee workforce factors, including the potential inability to attract and retain key personnel;

•

Growth in opportunities for the respective Duke Energy Registrants’ business units, including the timing and success of efforts to develop domestic and international power and other projects;

•

Construction and development risks associated with the completion of Duke Energy Registrants’ 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 ratepayers in a timely manner or at all;

•

The effect of accounting pronouncements issued periodically by accounting standard-setting bodies; and

•

The ability to successfully complete merger, acquisition or divestiture plans.

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. The Duke Energy Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I. FINANCIAL INFORMATION

DUKE ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions, except per-share amounts)

Item 1. Financial Statements


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Operating Revenues
Regulated electric	$	3,077		$	2,784		$	8,233		$	7,717
Non-regulated electric, natural gas and other		791			534			2,159			1,432
Regulated natural gas		78			78			435			472

Total operating revenues		3,946			3,396			10,827			9,621

Operating Expenses
Fuel used in electric generation and purchased power—regulated		990			900			2,598			2,521
Fuel used in electric generation and purchased power—non-regulated		335			197			895			502
Cost of natural gas and coal sold		36			41			272			317
Operation, maintenance and other		881			805			2,724			2,458
Depreciation and amortization		447			432			1,329			1,253
Property and other taxes		182			175			538			528
Goodwill and other impairment charges		44			414			700			420

Total operating expenses		2,915			2,964			9,056			7,999

Gains on Sales of Other Assets and Other, net		2			13			9			32

Operating Income		1,033			445			1,780			1,654

Other Income and Expenses
Equity in earnings of unconsolidated affiliates		21			17			86			42
Losses on sales and impairments of unconsolidated affiliates		(1	)		(3	)		(3	)		(9	)
Other income and expenses, net		116			82			297			210

Total other income and expenses		136			96			380			243

Interest Expense		202			190			624			560

Income From Continuing Operations Before Income Taxes		967			351			1,536			1,337
Income Tax Expense from Continuing Operations		301			244			643			600

Income From Continuing Operations		666			107			893			737
(Loss) Income From Discontinued Operations, net of tax		—			(1	)		1			—

Net Income		666			106			894			737
Less: Net (Loss) Income Attributable to Noncontrolling Interests		(4	)		(3	)		1			8

Net Income Attributable to Duke Energy Corporation	$	670		$	109		$	893		$	729


Earnings Per Share—Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common shareholders
Basic	$	0.51		$	0.08		$	0.68		$	0.56
Diluted	$	0.51		$	0.08		$	0.68		$	0.56
(Loss) Income from discontinued operations attributable to Duke Energy Corporation common shareholders
Basic	$	—		$	—		$	—		$	—
Diluted	$	—		$	—		$	—		$	—
Net income attributable to Duke Energy Corporation common shareholders
Basic	$	0.51		$	0.08		$	0.68		$	0.56
Diluted	$	0.51		$	0.08		$	0.68		$	0.56
Dividends per share	$	—		$	—		$	0.725		$	0.70
Weighted-average shares outstanding
Basic		1,320			1,299			1,315			1,289
Diluted		1,322			1,300			1,316			1,290

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)


	September 30, 2010		December 31, 2009
ASSETS
Current Assets
Cash and cash equivalents	$	1,808	$	1,542
Receivables (net of allowance for doubtful accounts of $33 at September 30, 2010 and $42 at December 31, 2009)		769		845
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $33 at September 30, 2010 and $6 at December 31, 2009)		1,243		896
Inventory		1,230		1,515
Other		987		968

Total current assets		6,037		5,766

Investments and Other Assets
Investments in equity method unconsolidated affiliates		351		436
Nuclear decommissioning trust funds		1,884		1,765
Goodwill		3,857		4,350
Intangibles, net		489		593
Notes receivable		43		45
Restricted other assets of variable interest entities		144		92
Other		2,359		2,526

Total investments and other assets		9,127		9,807

Property, Plant and Equipment
Cost		57,145		55,362
Cost, variable interest entities		648		—
Less accumulated depreciation and amortization		18,069		17,412

Net property, plant and equipment		39,724		37,950

Regulatory Assets and Deferred Debits
Deferred debt expense		250		258
Regulatory assets related to income taxes		751		557
Other		1,968		2,702

Total regulatory assets and deferred debits		2,969		3,517

Total Assets	$	57,857	$	57,040

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

(In millions, except per-share amounts)


	September 30, 2010			December 31, 2009
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	1,387		$	1,390
Non-recourse notes payable of variable interest entities		287			—
Taxes accrued		416			428
Interest accrued		246			222
Current maturities of long-term debt		242			902
Other		1,087			1,146

Total current liabilities		3,665			4,088

Long-term Debt		16,961			15,732

Non-recourse long-term debt of variable interest entities		801			381

Deferred Credits and Other Liabilities
Deferred income taxes		6,397			5,615
Investment tax credits		375			310
Asset retirement obligations		1,780			3,185
Other		5,729			5,843

Total deferred credits and other liabilities		14,281			14,953

Commitments and Contingencies
Equity
Common Stock, $0.001 par value, 2 billion shares authorized; 1,324 million and 1,309 million shares outstanding at September 30, 2010 and December 31, 2009, respectively		1			1
Additional paid-in capital		20,912			20,661
Retained earnings		1,396			1,460
Accumulated other comprehensive loss		(294	)		(372	)

Total Duke Energy Corporation shareholders’ equity		22,015			21,750
Noncontrolling interests		134			136

Total equity		22,149			21,886

Total Liabilities and Equity	$	57,857		$	57,040

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


	Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	894		$	737
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)		1,481			1,395
Equity component of AFUDC		(173	)		(106	)
Severance expense		77			—
Gains on sales of other assets		(10	)		(32	)
Impairment of goodwill and other long-lived assets		703			429
Deferred income taxes		527			659
Equity in earnings of unconsolidated affiliates		(86	)		(42	)
Contributions to qualified pension plans		—			(500	)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions		44			20
Receivables		87			226
Inventory		289			(279	)
Other current assets		123			28
Increase (decrease) in
Accounts payable		(100	)		(293	)
Taxes accrued		(76	)		81
Other current liabilities		(94	)		(70	)
Other assets		30			113
Other liabilities		(55	)		176

Net cash provided by operating activities		3,661			2,542

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(3,481	)		(3,024	)
Investment expenditures		(61	)		(103	)
Acquisitions, net of cash acquired		—			(124	)
Purchases of available-for-sale securities		(1,742	)		(2,432	)
Proceeds from sales and maturities of available-for-sale securities		1,773			2,394
Net proceeds from the sales of other assets, and sales of and collections on notes receivable		8			57
Purchases of emission allowances		(11	)		(56	)
Sales of emission allowances		20			43
Change in restricted cash		(29	)		41
Other		(2	)		(17	)

Net cash used in investing activities		(3,525	)		(3,221	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt		2,450			3,357
Issuance of common stock related to employee benefit plans		215			420
Payments for the redemption of long-term debt		(1,599	)		(1,279	)
Notes payable and commercial paper		16			(268	)
Distributions to noncontrolling interests		(5	)		(34	)
Dividends paid		(957	)		(908	)
Other		10			11

Net cash provided by financing activities		130			1,299

Net increase in cash and cash equivalents		266			620
Cash and cash equivalents at beginning of period		1,542			986

Cash and cash equivalents at end of period	$	1,808		$	1,606

Supplemental Disclosures
Significant non-cash transactions:
Accrued capital expenditures	$	524		$	316
Debt associated with the consolidation of Cinergy Receivables	$	342		$	—

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME

(Unaudited)

(In millions)


	Common Stock Shares		Common Stock		Additional Paid-in Capital			Retained Earnings			Duke Energy Corporation Shareholders Accumulated Other Comprehensive Income (Loss)
	Common Stock Shares		Common Stock		Additional Paid-in Capital			Retained Earnings			Foreign Currency Adjustments			Net Gains (Losses) on Cash Flow Hedges			Other			Pension and OPEB Related Adjustments to AOCI			Common Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2008		1,272	$	1	$	20,106		$	1,607		$	(306	)	$	(41	)	$	(28	)	$	(351	)	$	20,988		$	163		$	21,151

Net income		—		—		—			729			—			—			—			—			729			8			737
Other comprehensive income
Foreign currency translation adjustments		—		—		—			—			298			—			—			—			298			15			313
Pension and OPEB related adjustments to AOCI(a)		—		—		—			—			—			—			—			19			19			—			19
Net unrealized gain on cash flow hedges(b)		—		—		—			—			—			1			—			—			1			—			1
Reclassification into earnings from cash flow hedges(c)		—		—		—			—			—			16			—			—			16			—			16
Other(e)		—		—		—			—			—			—			5			—			5			—			5

Total comprehensive income																								1,068			23			1,091

Common stock issuances, including dividend reinvestment and employee benefits		31		—		451			—			—			—			—			—			451			—			451
Purchases and other changes in noncontrolling interest in subsidiaries		—		—		14			—			—			—			—			—			14			(49	)		(35	)
Common stock dividends		—		—		—			(908	)		—			—			—			—			(908	)		—			(908	)
Other		—		—		(5	)		—			—			—			—			—			(5	)		—			(5	)

Balance at September 30, 2009		1,303	$	1	$	20,566		$	1,428		$	(8	)	$	(24	)	$	(23	)	$	(332	)	$	21,608		$	137		$	21,745



Balance at December 31, 2009		1,309	$	1	$	20,661		$	1,460		$	17		$	(22	)	$	(31	)	$	(336	)	$	21,750		$	136		$	21,886

Net income		—		—		—			893			—			—			—			—			893			1			894
Other comprehensive income
Foreign currency translation adjustments		—		—		—			—			58			—			—			—			58			(1	)		57
Pension and OPEB related adjustments to AOCI(a)		—		—		—			—			—			—			—			19			19			—			19
Net unrealized loss on cash flow hedges(b)		—		—		—			—			—			(9	)		—			—			(9	)		—			(9	)
Reclassification into earnings from cash flow hedges(c)		—		—		—			—			—			2			—			—			2			—			2
Unrealized gain on investments in auction rate securities(d)		—		—		—			—			—						8			—			8			—			8

Total comprehensive income																								971			—			971

Common stock issuances, including dividend reinvestment and employee benefits		15		—		251			—			—			—			—			—			251			—			251
Common stock dividends		—		—		—			(957	)		—			—			—			—			(957	)		—			(957	)
Changes in noncontrolling interest in subsidiaries		—		—		—			—			—			—			—			—			—			(2	)		(2	)

Balance at September 30, 2010		1,324	$	1	$	20,912		$	1,396		$	75		$	(29	)	$	(23	)	$	(317	)	$	22,015		$	134		$	22,149

(a)	Net of $10 tax expense in both 2010 and in 2009.

(b)	Net of $3 tax benefit in 2010 and insignificant tax expense 2009.

(c)	Net of $1 tax expense in 2010 and $9 tax expense in 2009.

(d)	Net of $4 tax expense in 2010.

(e)	Net of $2 tax expense in 2009.

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Operating Revenues-Regulated Electric	$	1,877	$	1,544	$	4,935	$	4,187

Operating Expenses
Fuel used in electric generation and purchased power		594		454		1,506		1,222
Operation, maintenance and other		471		386		1,401		1,164
Depreciation and amortization		200		175		585		523
Property and other taxes		93		88		269		253

Total operating expenses		1,358		1,103		3,761		3,162

Gains on Sales of Other Assets and Other, net		2		9		7		22

Operating Income		521		450		1,181		1,047
Other Income and Expenses, net		51		34		163		87
Interest Expense		95		78		271		243

Income Before Income Taxes		477		406		1,073		891
Income Tax Expense		162		141		364		313

Net Income	$	315	$	265	$	709	$	578

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)


	September 30, 2010		December 31, 2009
ASSETS
Current Assets
Cash and cash equivalents	$	374	$	394
Receivables (net of allowance for doubtful accounts of $2 at September 30, 2010 and December 31, 2009)		532		839
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $7 at September 30, 2010 and $6 at December 31, 2009)		687		556
Inventory		633		846
Other		350		313

Total current assets		2,576		2,948

Investments and Other Assets
Nuclear decommissioning trust funds		1,884		1,765
Other		967		1,130

Total investments and other assets		2,851		2,895

Property, Plant and Equipment
Cost		30,672		29,917
Less accumulated depreciation and amortization		11,001		10,692

Net property, plant and equipment		19,671		19,225

Regulatory Assets and Deferred Debits
Deferred debt expense		172		179
Regulatory assets related to income taxes		579		471
Other		266		972

Total regulatory assets and deferred debits		1,017		1,622

Total Assets	$	26,115	$	26,690

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

(In millions)


	September 30, 2010			December 31, 2009
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities
Accounts payable	$	812		$	703
Taxes accrued		141			137
Interest accrued		134			105
Current maturities of long-term debt		7			509
Other		460			478

Total current liabilities		1,554			1,932

Long-term Debt		7,447			6,857

Non-recourse long-term debt of variable interest entities		300			300

Deferred Credits and Other Liabilities
Deferred income taxes		3,443			3,087
Investment tax credits		220			178
Asset retirement obligations		1,703			3,098
Other		2,814			2,967

Total deferred credits and other liabilities		8,180			9,330

Commitments and Contingencies
Member’s Equity
Member’s Equity		8,663			8,304
Accumulated other comprehensive loss		(29	)		(33	)

Total member’s equity		8,634			8,271

Total Liabilities and Member’s Equity	$	26,115		$	26,690

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


	Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	709		$	578
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)		730			659
Equity component of AFUDC		(129	)		(89	)
Severance expense		61			—
Gains on sales of other assets		(7	)		(22	)
Deferred income taxes		260			491
Contributions to qualified pension plans		—			(74	)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions		—			1
Receivables		(37	)		150
Inventory		217			(180	)
Other current assets		(1	)		(273	)
Increase (decrease) in
Accounts payable		42			(22	)
Taxes accrued		4			25
Other current liabilities		(50	)		(18	)
Other assets		26			(15	)
Other liabilities		(91	)		51

Net cash provided by operating activities		1,734			1,262

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(1,737	)		(1,602	)
Purchases of available-for-sale securities		(871	)		(1,790	)
Proceeds from sales and maturities of available-for-sale securities		845			1,770
Sales of emission allowances		7			21
Change in restricted cash		7			9
Notes due from affiliate, net		267			(5	)
Other		(8	)		(8	)

Net cash used in investing activities		(1,490	)		(1,605	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt		692			154
Payments for the redemption of long-term debt		(602	)		(356	)
Capital contribution from parent		—			250
Dividends to parent		(350	)		—
Other		(4	)		(1	)

Net cash (used in) provided by financing activities		(264	)		47

Net decrease in cash and cash equivalents		(20	)		(296	)
Cash and cash equivalents at beginning of period		394			323

Cash and cash equivalents at end of period	$	374		$	27

Supplemental Disclosures
Significant non-cash transactions:
Accrued capital expenditures	$	212		$	164

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY AND COMPREHENSIVE INCOME

(Unaudited)

(In millions)


				Accumulated Other Comprehensive Loss
	Member’s Equity			Net Gains (Losses) on Cash Flow Hedges			Other			Total
Balance at December 31, 2008	$	7,349		$	(27	)	$	(6	)	$	7,316

Net income		578			—			—			578
Other comprehensive income
Reclassification into earnings from cash flow hedges(a)		—			3			—			3
Unrealized loss on investments in auction rate securities(b)		—			—			(3	)		(3	)

Total comprehensive income											578
Advance forgiveness from parent		3			—			—			3
Capital contribution from parent		250			—			—			250

Balance at September 30, 2009	$	8,180		$	(24	)	$	(9	)	$	8,147



Balance at December 31, 2009	$	8,304		$	(24	)	$	(9	)	$	8,271

Net income		709			—			—			709
Other comprehensive income
Reclassification into earnings from cash flow hedges(a)		—			2			—			2
Unrealized gain on investments in auction rate securities(b)		—			—			2			2

Total comprehensive income											713
Dividend to parent		(350	)		—			—			(350	)

Balance at September 30, 2010	$	8,663		$	(22	)	$	(7	)	$	8,634

(a)	Net of $1 tax expense in 2010 and 2009.

(b)	Net of $1 tax expense in 2010 and $2 tax benefit in 2009.

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2010		2009			2010			2009
Operating Revenues
Regulated electric	$	520	$	637		$	1,449		$	1,785
Non-regulated electric and other		325		157			664			357
Regulated natural gas		78		78			436			472

Total operating revenues		923		872			2,549			2,614

Operating Expenses
Fuel used in electric generation and purchased power - regulated		140		210			410			627
Fuel used in electric generation and purchased power - non-regulated		138		74			319			179
Cost of natural gas and coal sold		13		15			191			240
Operation, maintenance and other		191		184			577			581
Depreciation and amortization		97		96			300			293
Property and other taxes		65		63			198			203
Goodwill and other impairment charges		—		769			837			769

Total operating expenses		644		1,411			2,832			2,892

Gains on Sales of Other Assets and Other, net		—		3			3			8

Operating Income (Loss)		279		(536	)		(280	)		(270	)
Other Income and Expenses, net		8		(1	)		22			4
Interest Expense		26		28			84			90

Income (Loss) Before Income Taxes		261		(565	)		(342	)		(356	)
Income Tax Expense		85		63			111			142

Net Income (Loss)	$	176	$	(628	)	$	(453	)	$	(498	)

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)


	September 30, 2010		December 31, 2009
ASSETS
Current Assets
Cash and cash equivalents	$	341	$	127
Receivables (net of allowance for doubtful accounts of $18 at September 30, 2010 and $17 at December 31, 2009)		619		563
Inventory		268		268
Other		138		176

Total current assets		1,366		1,134

Investments and Other Assets
Goodwill		921		1,598
Intangibles, net		257		332
Other		116		86

Total investments and other assets		1,294		2,016

Property, Plant and Equipment
Cost		10,136		10,243
Less accumulated depreciation and amortization		2,363		2,379

Net property, plant and equipment		7,773		7,864

Regulatory Assets and Deferred Debits
Deferred debt expense		23		24
Regulatory assets related to income taxes		90		83
Other		371		390

Total regulatory assets and deferred debits		484		497

Total Assets	$	10,917	$	11,511

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

(In millions, except share and per-share amounts)


	September 30, 2010			December 31, 2009
LIABILITIES AND COMMON STOCKHOLDER’S EQUITY
Current Liabilities
Accounts payable	$	323		$	512
Taxes accrued		157			152
Interest accrued		32			26
Current maturities of long-term debt		7			19
Other		119			128

Total current liabilities		638			837

Long-term Debt		2,560			2,573

Deferred Credits and Other Liabilities
Deferred income taxes		1,631			1,577
Investment tax credits		10			11
Accrued pension and other post-retirement benefit costs		233			249
Asset retirement obligations		27			36
Other		373			330

Total deferred credits and other liabilities		2,274			2,203

Commitments and Contingencies
Common Stockholder’s Equity
Common Stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at September 30, 2010 and December 31, 2009		762			762
Additional paid-in capital		5,570			5,570
Accumulated deficit		(858	)		(405	)
Accumulated other comprehensive loss		(29	)		(29	)

Total common stockholder’s equity		5,445			5,898

Total Liabilities and Common Stockholder’s Equity	$	10,917		$	11,511

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


	Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(453	)	$	(498	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		301			295
Severance expense		23			—
Gains on sales of other assets and other, net		(3	)		(8	)
Impairment of goodwill and other long-lived assets		837			769
Deferred income taxes		28			65
Accrued pension and other post-retirement benefit costs		11			11
Contributions to qualified pension plans		—			(143	)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions		(34	)		28
Receivables		56			(3	)
Inventory		1			(20	)
Other current assets		66			33
Increase (decrease) in
Accounts payable		(217	)		(164	)
Taxes accrued		(2	)		85
Other current liabilities		(17	)		(1	)
Other assets		15			43
Other liabilities		(31	)		37

Net cash provided by operating activities		581			529

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(242	)		(353	)
Purchases of emission allowances		(10	)		(19	)
Sales of emission allowances		10			15
Notes due from affiliate, net		(113	)		(221	)
Change in restricted cash		—			3

Net cash used in investing activities		(355	)		(575	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt		7			563
Payments for the redemption of long-term debt		(7	)		(102	)
Notes payable and commercial paper		(12	)		—
Notes payable to affiliate, net		—			(63	)
Dividends to parent		—			(360	)
Other		—			(3	)

Net cash (used in) provided by financing activities		(12	)		35

Net increase (decrease) in cash and cash equivalents		214			(11	)
Cash and cash equivalents at beginning of period		127			27

Cash and cash equivalents at end of period	$	341		$	16

Supplemental Disclosures
Significant non-cash transactions:
Accrued capital expenditures	$	92		$	36

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In millions)


								Accumulated Other Comprehensive Loss
	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Net Gains (Losses) on Cash Flow Hedges			Pension and OPEB Related Adjustments to AOCI			Total
Balance at December 31, 2008	$	762	$	5,570	$	381		$	(15	)	$	(28	)	$	6,670

Net loss		—		—		(498	)		—			—			(498	)
Other comprehensive income
Reclassification into earnings from cash flow hedges(a)		—		—		—			15			—			15
Pension and OPEB related adjustments to AOCI(b)		—		—		—			—			3			3

Total comprehensive loss															(480	)
Dividends to parent		—		—		(360	)		—			—			(360	)

Balance at September 30, 2009	$	762	$	5,570	$	(477	)	$	—		$	(25	)	$	5,830



Balance at December 31, 2009	$	762	$	5,570	$	(405	)	$	1		$	(30	)	$	5,898

Net loss		—		—		(453	)		—			—			(453	)
Other comprehensive income
Reclassification into earnings from cash flow hedges(a)		—		—		—			(1	)		—			(1	)
Pension and OPEB related adjustments to AOCI(b)		—		—		—			—			1			1

Total comprehensive loss															(453	)

Balance at September 30, 2010	$	762	$	5,570	$	(858	)	$	—		$	(29	)	$	5,445

(a)	Net of insignificant tax benefit in 2010 and $8 tax expense in 2009.

(b)	Net of insignificant tax expense in 2010 and $2 tax expense in 2009.

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY INDIANA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2010		2009			2010		2009
Operating Revenues-Regulated Electric	$	694	$	622		$	1,883	$	1,785

Operating Expenses
Fuel used in electric generation and purchased power		256		237			682		673
Operation, maintenance and other		131		142			445		441
Depreciation and amortization		95		110			281		300
Property and other taxes		19		19			52		59
Impairment charges		44		—			44		—

Total operating expenses		545		508			1,504		1,473

Losses on Sales of Other Assets and Other, net		—		(1	)		—		(1	)
Operating Income		149		113			379		311
Other Income and Expenses, net		19		13			51		30
Interest Expense		32		37			99		110

Income Before Income Taxes		136		89			331		231
Income Tax Expense		44		34			112		88

Net Income	$	92	$	55		$	219	$	143

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY INDIANA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)


	September 30, 2010		December 31, 2009
ASSETS
Current Assets
Cash and cash equivalents	$	212	$	20
Receivables (net of allowance for doubtful accounts of $1 at September 30, 2010 and December 31, 2009)		409		245
Inventory		246		312
Other		77		31

Total current assets		944		608

Investments and Other Assets
Intangibles, net		69		98
Other		122		134

Total investments and other assets		191		232

Property, Plant and Equipment
Cost		10,925		10,055
Less accumulated depreciation and amortization		3,302		3,129

Net property, plant and equipment		7,623		6,926

Regulatory Assets and Deferred Debits
Deferred debt expense		43		44
Regulatory assets related to income taxes		82		4
Other		591		596

Total regulatory assets and deferred debits		716		644

Total Assets	$	9,474	$	8,410

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY INDIANA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

(In millions, except share and per-share amounts)


	September 30, 2010		December 31, 2009
LIABILITIES AND COMMON STOCKHOLDER’S EQUITY
Current Liabilities
Accounts payable	$	262	$	354
Taxes accrued		56		47
Interest accrued		46		40
Current maturities of long-term debt		5		4
Other		88		123

Total current liabilities		457		568

Long-term Debt		3,469		3,086

Deferred Credits and Other Liabilities
Deferred income taxes		895		679
Investment tax credits		145		120
Accrued pension and other post-retirement benefit costs		305		314
Asset retirement obligations		47		42
Other		655		667

Total deferred credits and other liabilities		2,047		1,822

Commitments and Contingencies
Common Stockholder’s Equity
Common Stock, no par; $0.01 stated value, 60,000,000 shares authorized; 53,913,701 shares outstanding at September 30, 2010 and December 31, 2009		1		1
Additional paid-in capital		1,358		1,008
Retained earnings		2,134		1,915
Accumulated other comprehensive income		8		10

Total common stockholder’s equity		3,501		2,934

Total Liabilities and Common Stockholder’s Equity	$	9,474	$	8,410

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY INDIANA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


	Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	219		$	143
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		285			303
Equity component of AFUDC		(40	)		(18	)
Severance expense		26			—
Losses on sales of other assets and other, net		—			1
Impairment charges		44			—
Deferred income taxes and investment tax credit amortization		82			92
Contributions to qualified pension plans		—			(100	)
Accrued pension and other post-retirement benefit costs		18			17
(Increase) decrease in
Receivables		(2	)		21
Inventory		66			(77	)
Other current assets		8			23
Increase (decrease) in
Accounts payable		(98	)		(101	)
Taxes accrued		1			25
Other current liabilities		(21	)		6
Other assets		4			7
Other liabilities		(38	)		(11	)

Net cash provided by operating activities		554			331

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(922	)		(686	)
Purchases of available-for-sale securities		(17	)		(22	)
Proceeds from sales and maturities of available-for-sale securities		19			23
Proceeds from the sale of other assets		—			10
Purchases of emission allowances		(1	)		(37	)
Sales of emission allowances		3			6
Notes due from affiliate, net		(160	)		(134	)
Change in restricted cash		(5	)		7
Other		—			(1	)

Net cash used in investing activities		(1,083	)		(834	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt		571			899
Payments for the redemption of long-term debt		(197	)		(676	)
Capital contribution from parent		350			140
Other		(3	)		(4	)

Net cash provided by financing activities		721			359

Net increase (decrease) in cash and cash equivalents		192			(144	)
Cash and cash equivalents at beginning of period		20			144

Cash and cash equivalents at end of period	$	212		$	—

Supplemental Disclosures
Significant non-cash transactions:
Accrued capital expenditures	$	155		$	105

See Notes to Unaudited Condensed Consolidated Financial Statements

PART I

DUKE ENERGY INDIANA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY AND COMPREHENSIVE INCOME

(Unaudited)

(In millions)


							Accumulated Other Comprehensive Income
	Common Stock		Additional Paid-in Capital		Retained Earnings		Net Gains (Losses) on Cash Flow Hedges			Total
Balance at December 31, 2008	$	1	$	868	$	1,714	$	11		$	2,594

Net income		—		—		143		—			143
Other comprehensive loss
Reclassification into earnings from cash flow hedges(a)		—		—		—		(1	)		(1	)

Total comprehensive income											142
Capital contribution from parent		—		140		—		—			140

Balance at September 30, 2009	$	1	$	1,008	$	1,857	$	10		$	2,876



Balance at December 31, 2009	$	1	$	1,008	$	1,915	$	10		$	2,934

Net income		—		—		219		—			219
Other comprehensive loss
Reclassification into earnings from cash flow hedges(a)		—		—		—		(2	)		(2	)

Duke Energy Corporation (DUK)

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8-K

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