STOCK-BASED COMPENSATION

The Duke Energy Corporation 2015 Long-Term Incentive Plan (the 2015 Plan) provides for the grant of stock-based compensation awards to employees and outside directors. The 2015 Plan reserves 10 million shares of common stock for issuance. Duke Energy has historically issued new shares upon exercising or vesting of share-based awards. However, Duke Energy may use a combination of new share issuances and open market repurchases for share-based awards that are exercised or vest in the future. Duke Energy has not determined with certainty the amount of such new share issuances or open market repurchases.

The 2015 Plan supersedes the 2010 Long-Term Incentive Plan, as amended (the 2010 Plan), and the Progress Energy, Inc. 2007 Equity Incentive Plan (the Progress Plan). No additional grants will be made from the 2010 Plan and Progress Plan.

The following table summarizes the total expense recognized by the Duke Energy Registrants, net of tax, for stock-based compensation.



	Years Ended December 31,
(in millions)	2015		2014		2013
Duke Energy	$	38	$	38	$	52
Duke Energy Carolinas	14		12		13
Progress Energy	14		14		23
Duke Energy Progress	9		9		14
Duke Energy Florida	5		5		9
Duke Energy Ohio	2		5		4
Duke Energy Indiana	4		3		4

Duke Energy's pretax stock-based compensation costs, the tax benefit associated with stock-based compensation expense, and stock-based compensation costs capitalized are included in the following table.



	Years Ended December 31,
(in millions)	2015		2014		2013
Restricted stock unit awards	$	38	$	39	$	49
Performance awards	23		22		34
Stock options	—		—		2
Pretax stock-based compensation cost	$	61	$	61	$	85
Tax benefit associated with stock-based compensation expense	$	23	$	23	$	33
Stock-based compensation costs capitalized	3		4		3

STOCK OPTIONS

Stock options are granted with a maximum option term of 10 years and with an exercise price not less than the market price of Duke Energy's common stock on the grant date. Stock options outstanding at December 31, 2015, were not exercisable and the aggregate intrinsic value was not material. The following table summarizes information about stock options outstanding.



			Weighted Average
	Stock Options		Exercise Price		Weighted Average
	(in thousands)		(per share)		Remaining Life
Outstanding at December 31, 2014	373		$	64
Exercised	(270	)	62
Outstanding at December 31, 2015^(a)	103		69		7 years, 2 months

(a) Outstanding stock options all vested on January 1, 2016.

The following table summarizes additional information related to stock options exercised and granted.



	Years Ended December 31,
	2015		2014		2013
Intrinsic value of options exercised (in millions)	$	5	$	6	$	26
Tax benefit related to options exercised (in millions)	2		2		10
Cash received from options exercised (in millions)	17		25		9
Stock options granted (in thousands)^(a)	—		—		310

(a) Stock options granted in 2013 were expensed immediately.

RESTRICTED STOCK UNIT AWARDS

Restricted stock unit awards generally vest over periods from immediate to three years. Fair value amounts are based on the market price of Duke Energy's common stock on the grant date. The following table includes information related to restricted stock unit awards.



	Years Ended December 31,
	2015		2014		2013
Shares awarded (in thousands)	524		557		612
Fair value (in millions)	$	41	$	40	$	42

The following table summarizes information about restricted stock unit awards outstanding.



			Weighted Average
	Shares		Grant Date Fair Value
	(in thousands)		(per share)
Outstanding at December 31, 2014	1,080		$	69
Granted	524		79
Vested	(602	)	68
Forfeited	(49	)	73
Outstanding at December 31, 2015	953		75
Restricted stock unit awards expected to vest	924		75

The total grant date fair value of shares vested during the years ended December 31, 2015, 2014 and 2013 was $41 million, $52 million and $50 million, respectively. At December 31, 2015, Duke Energy had $19 million of unrecognized compensation cost, which is expected to be recognized over a weighted average period of one year, eleven months.

PERFORMANCE AWARDS

Stock-based performance awards generally vest over three years if performance targets are met.

Performance awards granted in 2015, 2014 and 2013 contain market conditions based on the total shareholder return (TSR) of Duke Energy stock relative to a predefined peer group (relative TSR). These awards are valued using a path-dependent model that incorporates expected relative TSR into the fair value determination of Duke Energy’s performance-based share awards. The model uses three-year historical volatilities and correlations for all companies in the predefined peer group, including Duke Energy, to simulate Duke Energy’s relative TSR as of the end of the performance period. For each simulation, Duke Energy’s relative TSR associated with the simulated stock price at the end of the performance period plus expected dividends within the period results in a value per share for the award portfolio. The average of these simulations is the expected portfolio value per share. Actual life to date results of Duke Energy’s relative TSR for each grant are incorporated within the model.

For performance awards granted in 2015, the model used a risk-fee interest rate of 1.0 percent, which reflects the yield on three-year Treasury bonds as of the grant date, and an expected volatility of 13.6 percent based on Duke Energy's historical volatility over three years using daily stock prices.

The following table includes information related to stock-based performance awards.



	Years Ended December 31,
	2015		2014		2013
Shares awarded (in thousands)	642		542		633
Fair value (in millions)	$	26	$	19	$	28

The following table summarizes information about stock-based performance awards outstanding and assumes payout at the maximum level.



			Weighted Average
	Shares		Grant Date Fair Value
	(in thousands)		(per share)
Outstanding at December 31, 2014	1,627		$	42
Granted	642		41
Vested	(271	)	51
Forfeited	(301	)	38
Outstanding at December 31, 2015	1,697		40
Stock-based performance awards expected to vest	1,301		40

The total grant date fair value of shares vested during the years ended December 31, 2015, 2014 and 2013 was $26 million, $27 million and $42 million, respectively. At December 31, 2015, Duke Energy had $22 million of unrecognized compensation cost, which is expected to be recognized over a weighted average period of one year, two months.