During 2012, Duke Energy received proceeds of $187 million from the sale of non-core business assets within the Commercial Power segment for which no material gain or loss was recognized.
3. BUSINESS SEGMENTS
Duke Energy evaluates segment performance based on segment income. Segment income is defi ned 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 affi liate 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 Power.
Regulated Utilities conducts operations primarily through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana, and the regulated transmission and distribution operations of Duke Energy Ohio. These electric and natural gas operations are subject to the rules and regulations of the FERC, NCUC, PSCSC, FPSC, PUCO, IURC and KPSC. Substantially all of Regulated Utilities’ operations are regulated and, accordingly, these operations qualify for regulatory accounting treatment.
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 National Methanol Company (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.
Commercial Power builds, develops and operates renewable generation and energy transmission projects throughout the continental U.S. As discussed in Note 2, Duke Energy entered into an agreement to sell Commercial Power’s nonregulated Midwest generation business to Dynegy in a transaction that is expected to close during the second quarter of 2015. As a result of this divestiture, the results of operations of the nonregulated Midwest generation business have been reclassifi ed to Discontinued Operations on the Consolidated Statements of Operations. Certain costs such as interest and general and administrative expenses previously allocated to the Disposal Group were not reclassifi ed to discontinued operations.
The remainder of Duke Energy’s operations is presented as Other. While it is not an operating segment, Other primarily includes unallocated corporate interest expense, certain unallocated corporate costs, Bison Insurance Company Limited (Bison), Duke Energy’s wholly owned, captive insurance subsidiary, and contributions to the Duke Energy Foundation. On December 31, 2013, Duke Energy sold its interest in DukeNet Communications Holdings, LLC (DukeNet) to Time Warner Cable, Inc.
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)
Year Ended December 31, 2014 (in millions) Regulated Utilities International Energy Commercial Power Total Reportable
Segments Other Eliminations Total
Unaffi liated Revenues $ 22,228 $ 1,417 $ 255 $ 23,900 $ 25 $ — $ 23,925
Intersegment Revenues 43 — — 43 80 (123) —
Total Revenues $ 22,271 $ 1,417 $ 255 $ 23,943 $ 105 $ (123) $ 23,925
Interest Expense $ 1,093 $ 93 $ 58 $ 1,244 $ 400 $ (22) $ 1,622
Depreciation and amortization 2,759 97 92 2,948 118 — 3,066
Equity in earnings of unconsolidated affi liates (3) 120 10 127 3 — 130
Income tax expense (benefi t)(a) 1,628 449 (171) 1,906 (237) — 1,669
Segment income(b)(c)(d) 2,795 55 (55) 2,795 (334) (10) 2,451
Add back noncontrolling interest component 14
Loss from discontinued operations, net of tax (576)
Net income $ 1,889
Capital investments expenditures and acquisitions $ 4,744 $ 67 $ 555 $ 5,366 $ 162 $ — $ 5,528
Segment Assets 106,657 5,132 6,278 118,067 2,453 189 120,709
(a) International Energy includes a tax adjustment of $373 million related to deferred tax impact resulting from the decision to repatriate all cumulative historical undistributed foreign earnings. See Note 22 for additional information.
(b) Commercial Power recorded a pretax impairment charge of $94 million related to OVEC. See Note 11 for additional information. (c) Other includes costs to achieve the Progress Energy merger. See Notes 2 and 25 for additional information about the merger and related costs.
(d) Regulated Utilities includes an increase in the litigation reserve related to the criminal investigation of the Dan River coal ash spill. See Note 5 for additional information.
Year Ended December 31, 2013 (in millions) Regulated Utilities International Energy Commercial Power Total Reportable
Segments Other Eliminations Total
Unaffi liated Revenues(a)(b)(c) $ 20,871 $ 1,546 $ 254 $ 22,671 $ 85 $ — $ 22,756
Intersegment Revenues 39 — 6 45 90 (135) —
Total Revenues $ 20,910 $ 1,546 $ 260 $ 22,716 $ 175 $ (135) $ 22,756
Interest Expense $ 986 $ 86 $ 61 $ 1,133 $ 416 $ (6) $ 1,543
Depreciation and amortization 2,323 100 110 2,533 135 — 2,668
Equity in earnings of unconsolidated affi liates (1) 110 7 116 6 — 122
Income tax expense (benefi t) 1,522 166 (148) 1,540 (335) — 1,205
Segment income(a)(b)(c)(d)(e)(f)(g) 2,504 408 (88) 2,824 (238) (12) 2,574
Add back noncontrolling interest component 16
Income from discontinued operations, net of tax 86
Net income $ 2,676
Capital investments expenditures and acquisitions $ 5,049 $ 67 $ 268 $ 5,384 $ 223 $ — $ 5,607
Segment Assets 99,884 4,998 6,955 111,837 2,754 188 114,779
(a) In May 2013, the PUCO approved a Duke Energy Ohio settlement agreement that provides for a net annual increase in electric distribution revenues beginning in May 2013. This rate increase impacts Regulated Utilities. See Note 4 for additional information.
(b) In June 2013, NCUC approved a Duke Energy Progress settlement agreement that included an increase in rates in the fi rst year beginning in June 2013. This rate increase impacts Regulated Utilities. See Note 4 for additional information.
(c) In September 2013, Duke Energy Carolinas implemented revised customer rates approved by the NCUC and the PSCSC. These rate increases impact Regulated Utilities. See Note 4 for additional information. (d) Regulated Utilities recorded an impairment charge related to Duke Energy Florida’s Crystal River Unit 3. See Note 4 for additional information.
(e) Regulated Utilities recorded an impairment charge related to the letter Duke Energy Progress fi led with the NRC requesting the NRC to suspend its review activities associated with the combined construction and operating license (COL) at the Harris site. Regulated Utilities also recorded an impairment charge related to the write-off of the wholesale portion of the Levy investments at Duke Energy Florida in accordance with the 2013 Settlement. See Note 4 for additional information.
(f) Other includes costs to achieve the Progress Energy merger. See Notes 2 and 25 for additional information about the merger and related costs. (g) Other includes gain from the sale of Duke Energy’s ownership interest in DukeNet. See Note 12 for additional information on the sale of DukeNet.
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)
Year Ended December 31, 2012
(in millions) Regulated Utilities International Energy Commercial Power Reportable Segments Other Eliminations Total
Unaffi liated Revenues $ 16,042 $ 1,549 $ 299 $ 17,890 $ 22 $ — $ 17,912
Intersegment Revenues 38 — 8 46 62 (108) —
Total Revenues $ 16,080 $ 1,549 $ 307 $ 17,936 $ 84 $ (108) $ 17,912
Interest Expense $ 806 $ 77 $ 63 $ 946 $ 298 $ — $ 1,244
Depreciation and amortization 1,827 99 85 2,011 134 — 2,145
Equity in earnings of unconsolidated affi liates (5) 134 14 143 5 — 148
Income tax expense (benefi t) 942 149 (82) 1,009 (386) — 623
Segment income(a)(b) 1,744 439 (59) 2,124 (523) (8) 1,593
Add back noncontrolling interest component 18
Income from discontinued operations, net of tax 171
Net income $ 1,782
Capital investments expenditures and acquisitions $ 4,220 $ 551 $ 1,038 $ 5,809 $ 149 $ — $ 5,958
Segment Assets 98,162 5,406 6,992 110,560 3,126 170 113,856
(a) Regulated Utilities recorded charges related to Duke Energy Indiana’s Integrated Gasifi cation Combined Cycle (IGCC) project. See Note 4 for additional information about these charges. Regulated Utilities also recorded the reversal of expenses of $60 million, net of tax, related to a prior year Voluntary Opportunity Plan in accordance with Duke Energy Carolinas’ 2011 rate case. See Note 19 for additional information about these expenses. (b) Other includes costs to achieve the Progress Energy merger. See Notes 2 and 25 for additional information about the merger and related costs.