INVESTMENTS IN DEBT AND EQUITY SECURITIES

AVAILABLE-FOR-SALE SECURITIES

The Duke Energy Registrants classify their investments in debt and equity securities as available-for-sale.

Duke Energy’s available-for-sale securities are primarily comprised of investments held in (i) the nuclear decommissioning fund (NDTF) at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to OPEB plans, and (iii) Duke Energy’s captive insurance investment portfolio.

Duke Energy classifies all other investments in debt and equity securities as long-term, unless otherwise noted.

Investment Trusts

The investments within the NDTF investments and the Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana grantor trusts (Investment Trusts) are managed by independent investment managers with discretion to buy, sell, and invest pursuant to the objectives set forth by the trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. As a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt and equity securities within the Investment Trusts are considered other-than-temporary impairments and are recognized immediately.

Investments within the Investment Trusts generally qualify for regulatory accounting, and accordingly realized and unrealized gains and losses are deferred as a regulatory asset or liability. Certain investments held in Duke Energy Florida's NDTF were acquired in a settlement with Florida Municipal Joint Owners (FMJO) and do not qualify for regulatory accounting. Unrealized gains and losses on these assets are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired, and realized gains and losses are included within Other income and expense, net on the Condensed Consolidated Statements of Operations. The value of these assets has not materially changed since the assets were acquired from FMJO. As a result, there is no material impact on earnings of the Duke Energy Registrants.

Other Available-for-Sale Securities

Unrealized gains and losses on all other available-for-sale securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired. If an other-than-temporary impairment exists, the unrealized loss is included in earnings based on the criteria discussed below.

The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value should be considered other-than-temporary. Criteria used to evaluate whether an impairment associated with equity securities is other-than-temporary includes, but is not limited to, (i) the length of time over which the market value has been lower than the cost basis of the investment, (ii) the percentage decline compared to the cost of the investment, and (iii) management’s intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in market value. If a decline in fair value is determined to be other-than-temporary, the investment is written down to its fair value through a charge to earnings.

If the entity does not have an intent to sell a debt security and it is not more likely than not management will be required to sell the debt security before the recovery of its cost basis, the impairment write-down to fair value would be recorded as a component of other comprehensive income, except for when it is determined a credit loss exists. In determining whether a credit loss exists, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than the amortized cost basis, (ii) changes in the financial condition of the issuer of the security, or in the case of an asset backed security, the financial condition of the underlying loan obligors, (iii) consideration of underlying collateral and guarantees of amounts by government entities, (iv) ability of the issuer of the security to make scheduled interest or principal payments, and (v) any changes to the rating of the security by rating agencies. If a credit loss exists, the amount of impairment write-down to fair value is split between credit loss and other factors. The amount related to credit loss is recognized in earnings. The amount related to other factors is recognized in other comprehensive income. There were no credit losses as of March 31, 2016 and December 31, 2015.

DUKE ENERGY

The following table presents the estimated fair value of investments in available-for-sale securities.



	March 31, 2016						December 31, 2015
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(b)		Value		Gains		Losses_(b)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	201	$	—	$	—	$	179
Equity securities	1,823		64		3,592		1,823		58		3,590
Corporate debt securities	16		3		454		7		8		432
Municipal bonds	6		—		211		5		1		185
U.S. government bonds	33		—		1,288		11		5		1,254
Other debt securities	1		4		148		—		4		177
Total NDTF	$	1,879	$	71	$	5,894	$	1,846	$	76	$	5,817
Other Investments
Cash and cash equivalents	$	—	$	—	$	29	$	—	$	—	$	29
Equity securities	33		1		97		32		1		95
Corporate debt securities	1		2		91		1		3		92
Municipal bonds	3		1		76		3		1		74
U.S. government bonds	2		—		56		—		—		45
Other debt securities	—		2		55		—		2		62
Total Other Investments^(a)	$	39	$	6	$	404	$	36	$	7	$	397
Total Investments	$	1,918	$	77	$	6,298	$	1,882	$	83	$	6,214

(a) These amounts are recorded in Other with Investments and Other Assets on the Condensed Consolidated Balance Sheets.


(b)	Substantially all these amounts are considered other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.

The table below summarizes the maturity date for debt securities.



(in millions)	March 31, 2016
Due in one year or less	$	136
Due after one through five years	769
Due after five through 10 years	559
Due after 10 years	915
Total	$	2,379

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.



	Three Months Ended
	March 31,
(in millions)	2016		2015
Realized gains	$	54	$	102
Realized losses	50		14

DUKE ENERGY CAROLINAS

The following table presents the estimated fair value of investments in available-for-sale securities.



	March 31, 2016						December 31, 2015
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(b)		Value		Gains		Losses_(b)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	50	$	—	$	—	$	34
Equity securities	1,022		31		2,088		1,021		27		2,094
Corporate debt securities	8		2		257		3		5		292
Municipal bonds	1		—		53		1		—		33
U.S. government bonds	12		—		502		3		3		438
Other debt securities	1		4		138		—		4		147
Total NDTF	$	1,044	$	37	$	3,088	$	1,028	$	39	$	3,038
Other Investments
Other debt securities	$	—	$	1	$	3	$	—	$	1	$	3
Total Other Investments^(a)	$	—	$	1	$	3	$	—	$	1	$	3
Total Investments	$	1,044	$	38	$	3,091	$	1,028	$	40	$	3,041


(a)	These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.


(b)	Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.

The table below summarizes the maturity date for debt securities.



(in millions)	March 31, 2016
Due in one year or less	$	14
Due after one through five years	195
Due after five through 10 years	224
Due after 10 years	520
Total	$	953

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.



	Three Months Ended
	March 31,
(in millions)	2016		2015
Realized gains	$	34	$	90
Realized losses	37		12

PROGRESS ENERGY

The following table presents the estimated fair value investments in available-for-sale securities.



	March 31, 2016						December 31, 2015
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(b)		Value		Gains		Losses_(b)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	151	$	—	$	—	$	145
Equity securities	801		33		1,504		802		31		1,496
Corporate debt securities	8		1		197		4		3		140
Municipal bonds	5		—		158		4		1		152
U.S. government bonds	21		—		786		8		2		816
Other debt securities	—		—		10		—		—		30
Total NDTF	$	835	$	34	$	2,806	$	818	$	37	$	2,779
Other Investments
Cash and cash equivalents	$	—	$	—	$	17	$	—	$	—	$	18
Municipal bonds	3		—		46		3		—		45
Total Other Investments^(a)	$	3	$	—	$	63	$	3	$	—	$	63
Total Investments	$	838	$	34	$	2,869	$	821	$	37	$	2,842

(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.


(b)	Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.

The table below summarizes the maturity date for debt securities.



(in millions)	March 31, 2016
Due in one year or less	$	101
Due after one through five years	486
Due after five through 10 years	264
Due after 10 years	346
Total	$	1,197

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.



	Three Months Ended
	March 31,
(in millions)	2016		2015
Realized gains	$	19	$	12
Realized losses	13		1

DUKE ENERGY PROGRESS

The following table presents the estimated fair value of investments in available-for-sale securities.



	March 31, 2016						December 31, 2015
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(b)		Value		Gains		Losses_(b)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	100	$	—	$	—	$	110
Equity securities	595		27		1,184		596		25		1,178
Corporate debt securities	6		1		145		3		2		96
Municipal bonds	5		—		158		4		1		150
U.S. government bonds	15		—		479		6		2		486
Other debt securities	—		—		6		—		—		18
Total NDTF	$	621	$	28	$	2,072	$	609	$	30	$	2,038
Other Investments
Cash and cash equivalents	$	—	$	—	$	1	$	—	$	—	$	1
Total Other Investments^(a)	$	—	$	—	$	1	$	—	$	—	$	1
Total Investments	$	621	$	28	$	2,073	$	609	$	30	$	2,039

(a) These amounts are recorded in Other with Investments and Other Assets on the Condensed Consolidated Balance Sheets.


(b)	Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.

The table below summarizes the maturity date for debt securities.



(in millions)	March 31, 2016
Due in one year or less	$	37
Due after one through five years	282
Due after five through 10 years	219
Due after 10 years	250
Total	$	788

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.



	Three Months Ended
	March 31,
(in millions)	2016		2015
Realized gains	$	15	$	9
Realized losses	11		1

DUKE ENERGY FLORIDA

The following table presents the estimated fair value of investments in available-for-sale securities.



	March 31, 2016						December 31, 2015
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(b)		Value		Gains		Losses_(b)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	51	$	—	$	—	$	35
Equity securities	206		6		320		206		6		318
Corporate debt securities	2		—		52		1		1		44
Municipal bonds	—		—		—		—		—		2
U.S. government bonds	6		—		307		2		—		330
Other debt securities	—		—		4		—		—		12
Total NDTF^(c)	$	214	$	6	$	734	$	209	$	7	$	741
Other Investments
Cash and cash equivalents	$	—	$	—	$	1	$	—	$	—	$	6
Municipal bonds	3		—		46		3		—		45
Total Other Investments^(a)	$	3	$	—	$	47	$	3	$	—	$	51
Total Investments	$	217	$	6	$	781	$	212	$	7	$	792

(a) These amounts are recorded in Other with Investments and Other Assets on the Condensed Consolidated Balance Sheets.


(b)	Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.


(c)	The decrease in estimated fair value of the NDTF as of March 31, 2016, is primarily due to reimbursements from the NDTF for Duke Energy Florida's cost related to ongoing decommissioning activity of the Crystal River Unit 3 Nuclear Plant.

The table below summarizes the maturity date for debt securities.



(in millions)	March 31, 2016
Due in one year or less	$	64
Due after one through five years	204
Due after five through 10 years	45
Due after 10 years	96
Total	$	409

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.



	Three Months Ended
	March 31,
(in millions)	2016		2015
Realized gains	$	4	$	3
Realized losses	2		—

DUKE ENERGY INDIANA

The following table presents the estimated fair value of investments in available-for-sale securities.



	March 31, 2016						December 31, 2015
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(b)		Value		Gains		Losses_(b)		Value
Other Investments
Cash and cash equivalents	$	—	$	—	$	1	$	—	$	—	$	2
Equity securities	27		—		72		27		—		71
Corporate debt securities	—		—		2		—		—		2
Municipal bonds	—		1		27		—		1		26
Total Other Investments^(a)	$	27	$	1	$	102	$	27	$	1	$	101
Total Investments	$	27	$	1	$	102	$	27	$	1	$	101

(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.


(b)	Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.

The table below summarizes the maturity date for debt securities.



(in millions)	March 31, 2016
Due in one year or less	$	2
Due after one through five years	14
Due after five through 10 years	9
Due after 10 years	4
Total	$	29

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were insignificant for the three months ended March 31, 2016 and 2015.