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Leases

12 Months Ended

Dec. 31, 2023

LEASES

As part of its operations, Duke Energy leases certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and railcars), land and office space under various terms and expiration dates. Additionally, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Indiana have finance leases related to firm natural gas pipeline transportation capacity. Duke Energy Progress and Duke Energy Florida have entered into certain PPAs, which are classified as finance and operating leases.

Duke Energy has certain lease agreements, which include variable lease payments that are based on the usage of an asset. These variable lease payments are not included in the measurement of the ROU assets or operating lease liabilities on the Consolidated Financial Statements.

Certain Duke Energy lease agreements include options for renewal and early termination. The intent to renew a lease varies depending on the lease type and asset. Renewal options that are reasonably certain to be exercised are included in the lease measurements. The decision to terminate a lease early is dependent on various economic factors. No termination options have been included in any of the lease measurements.

Duke Energy Carolinas entered into a sale-leaseback arrangement in December 2019, to construct and occupy an office tower. The lease agreement was evaluated as a sale-leaseback of real estate and it was determined that the transaction did not qualify for sale-leaseback accounting. As a result, the transaction is being accounted for as a financing. For this transaction, Duke Energy Carolinas will continue to record the real estate on the Consolidated Balance Sheets within Property, Plant and Equipment as if it were the legal owner and will continue to recognize depreciation expense over the estimated useful life. In addition, the failed sale-leaseback obligation is reported within Long-Term Debt on the Consolidated Balance Sheets, with the monthly lease payments commencing after the construction phase being split between interest expense and principal pay down of the debt.

Piedmont has certain agreements with Duke Energy Carolinas for the construction and transportation of natural gas pipelines to supply its natural gas plant needs. Piedmont accounts for these pipeline lateral contracts as sales-type leases since the present value of the sum of the lease payments equals the fair value of the assets. These pipeline lateral assets owned by Piedmont had a current net investment basis of $2 million as of December 31, 2023, and 2022, and a long-term net investment basis of $199 million and $201 million as of December 31, 2023, and 2022, respectively. These assets are classified in Other, within Current Assets and Other Noncurrent Assets, respectively, on Piedmont's Consolidated Balance Sheets. Duke Energy Carolinas accounts for the contracts as finance leases. The activity for these contracts is eliminated in consolidation at Duke Energy.

The following tables present the components of lease expense.


	Year Ended December 31, 2023
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Operating lease expense(a)	$	236	$	41	$	157	$	80	$	77	$	11	$	17	$	2
Short-term lease expense(a)	5		—		2		1		1		—		1		—
Variable lease expense(a)	27		2		22		11		11		—		—		1
Finance lease expense
Amortization of leased assets(b)	160		7		57		35		22		—		—		—
Interest on lease liabilities(c)	46		31		45		43		2		—		1		—
Total finance lease expense	206		38		102		78		24		—		1		—
Total lease expense	$	474	$	81	$	283	$	170	$	113	$	11	$	19	$	3


	Year Ended December 31, 2022
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Operating lease expense(a)	$	229	$	39	$	153	$	83	$	70	$	10	$	19	$	6
Short-term lease expense(a)	4		—		1		—		1		—		2		—
Variable lease expense(a)	61		(1)		60		37		23		—		—		1
Finance lease expense
Amortization of leased assets(b)	151		6		61		41		20		—		—		—
Interest on lease liabilities(c)	50		32		49		45		4		—		1		—
Total finance lease expense	201		38		110		86		24		—		1		—
Total lease expense	$	495	$	76	$	324	$	206	$	118	$	10	$	22	$	7

(a) Included in Operations, maintenance and other or, for barges and railcars, Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.

(b) Included in Depreciation and amortization on the Consolidated Statements of Operations.

The following table presents operating lease maturities and a reconciliation of the undiscounted cash flows to operating lease liabilities.


	December 31, 2023
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
2024	$	244	$	21	$	116	$	56	$	60	$	2	$	7	$	5
2025	214		16		102		42		60		2		7		4
2026	201		15		105		46		59		2		6		1
2027	170		9		79		47		32		2		5		—
2028	136		8		67		47		20		1		4		—
Thereafter	388		41		315		163		152		13		39		—
Total operating lease payments	1,353		110		784		401		383		22		68		10
Less: Present value discount	(248)		(20)		(146)		(63)		(83)		(5)		(16)		—
Total operating lease liabilities(a)	$	1,105	$	90	$	638	$	338	$	300	$	17	$	52	$	10

(a) Certain operating lease payments include renewal options that are reasonably certain to be exercised.

The following table presents finance lease maturities and a reconciliation of the undiscounted cash flows to finance lease liabilities.


	December 31, 2023
			Duke				Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Indiana
2024	$	157	$	38	$	88	$	79	$	9	$	1
2025	88		38		85		80		5		1
2026	83		38		86		81		5		1
2027	76		38		83		81		2		1
2028	74		38		81		81		—		1
Thereafter	511		389		474		474		—		21
Total finance lease payments	989		579		897		876		21		26
Less: Amounts representing interest	(350)		(302)		(326)		(324)		(2)		(17)
Total finance lease liabilities	$	639	$	277	$	571	$	552	$	19	$	9

The following tables contain additional information related to leases.


		December 31, 2023
				Duke				Duke		Duke		Duke		Duke
		Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Classification	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Assets
Operating	Operating lease ROU assets, net	$	1,092	$	78	$	617	$	318	$	299	$	16	$	50	$	4
Finance	Net property, plant and equipment	687		268		615		552		63		—		6		—
Total lease assets		$	1,779	$	346	$	1,232	$	870	$	362	$	16	$	56	$	4
Liabilities
Current
Operating	Other current liabilities	$	188	$	15	$	94	$	45	$	49	$	1	$	6	$	—
Finance	Current maturities of long-term debt	115		8		46		38		8		—		—		—
Noncurrent
Operating	Operating lease liabilities	917		75		544		293		251		16		46		10
Finance	Long-Term Debt	524		269		525		514		11		—		9		—
Total lease liabilities		$	1,744	$	367	$	1,209	$	890	$	319	$	17	$	61	$	10


		December 31, 2022
				Duke				Duke		Duke		Duke		Duke
		Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Classification	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Assets
Operating	Operating lease ROU assets, net	$	1,042	$	78	$	628	$	370	$	258	$	18	$	49	$	4
Finance	Net property, plant and equipment	810		284		674		590		84		—		6		—
Total lease assets		$	1,852	$	362	$	1,302	$	960	$	342	$	18	$	55	$	4
Liabilities
Current
Operating	Other current liabilities	$	179	$	14	$	96	$	51	$	45	$	1	$	4	$	—
Finance	Current maturities of long-term debt	153		7		57		35		22		—		—		—
Noncurrent
Operating	Operating lease liabilities	876		83		546		335		211		17		47		13
Finance	Long-Term Debt	611		277		571		552		19		—		9		—
Total lease liabilities		$	1,819	$	381	$	1,270	$	973	$	297	$	18	$	60	$	13


	Year Ended December 31, 2023
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Cash paid for amounts included in the measurement of lease liabilities(a)
Operating cash flows from operating leases	$	228	$	18	$	123	$	64	$	59	$	2	$	7	$	—
Operating cash flows from finance leases	46		31		45		43		2		—		1		—
Financing cash flows from finance leases	160		7		57		35		22		—		—		—


Lease assets obtained in exchange for new lease liabilities (non-cash)
Operating	$	286	$	14	$	92	$	1	$	91	$	2	$	6	$	2
Finance	36		—		—		—		—		—		—		—


	Year Ended December 31, 2022
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Cash paid for amounts included in the measurement of lease liabilities(a)
Operating cash flows from operating leases	$	230	$	24	$	118	$	63	$	55	$	2	$	6	$	4
Operating cash flows from finance leases	50		32		49		45		4		—		1		—
Financing cash flows from finance leases	151		6		61		41		20		—		—		—


Lease assets obtained in exchange for new lease liabilities (non-cash)
Operating	$	111	$	10	$	—	$	—	$	—	$	—	$	—	$	—
Finance	—		—		—		—		—		—		—		—

(a) No amounts were classified as investing cash flows from operating leases.


	December 31, 2023
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Weighted average remaining lease term (years)
Operating leases	9		10		10		9		11		13		13		4
Finance leases	11		16		11		11		18		—		22		3
Weighted average discount rate(a)
Operating leases	3.1	%	4.0	%	3.8	%	3.6	%	4.0	%	4.2	%	3.9	%	2.4	%
Finance leases	8.5	%	11.5	%	9.1	%	9.2	%	7.6	%	—	%	11.9	%	5.4	%


	December 31, 2022
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Weighted average remaining lease term (years)
Operating leases	8		10		8		9		6		15		15		1
Finance leases	10		17		12		12		12		—		23		—
Weighted average discount rate(a)
Operating leases	3.4	%	3.8	%	3.6	%	3.5	%	3.8	%	4.2	%	4.0	%	3.3	%
Finance leases	7.7	%	11.5	%	9.1	%	9.1	%	8.0	%	—	%	11.9	%	—	%

(a) The discount rate is calculated using the rate implicit in a lease if it is readily determinable. Generally, the rate used by the lessor is not provided to Duke Energy and in these cases the incremental borrowing rate is used. Duke Energy will typically use its fully collateralized incremental borrowing rate as of the commencement date to calculate and record the lease. The incremental borrowing rate is influenced by the lessee’s credit rating and lease term and as such may differ for individual leases, embedded leases or portfolios of leased assets.

Leases