XML 188 R15.htm IDEA: XBRL DOCUMENT

Leases

12 Months Ended

Dec. 31, 2019

LEASES

As described in Note 1, Duke Energy adopted the revised accounting guidance for Leases effective January 1, 2019, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. Adoption of the new standard resulted in the recording of ROU assets and operating lease liabilities as follows:



	As of January 1, 2019
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
ROU assets	$	1,750	$	153	$	863	$	407	$	456	$	23	$	61	$	26
Operating lease liabilities – current	205		28		96		35		61		1		4		4
Operating lease liabilities – noncurrent	1,504		127		766		371		395		22		58		25

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, a liability will be recorded for the failed sale-leaseback obligation 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.

Duke Energy operates various renewable energy projects and sells the generated output to utilities, electric cooperatives, municipalities and commercial and industrial customers through long-term PPAs. In certain situations, these PPAs and the associated renewable energy projects qualify as operating leases. Rental income from these leases is accounted for as Nonregulated electric and other revenues in the Consolidated Statements of Operations. There are no minimum lease payments as all payments are contingent based on actual electricity generated by the renewable energy projects. Contingent lease payments were $264 million, $268 million and $262 million for the years ended December 31, 2019, 2018, and 2017, respectively. Renewable energy projects owned by Duke Energy and accounted for as operating leases had a cost basis of $3,349 million and $3,358 million and accumulated depreciation of $721 million and $602 million at December 31, 2019, and 2018, respectively. These assets are principally classified as nonregulated electric generation and transmission assets.

Piedmont has an agreement with Duke Energy Carolinas for the construction and transportation of natural gas pipelines to supply its natural gas plant needs. Piedmont accounts for this pipeline lateral contract as a lessor and sales-type lease since the present value of the sum of the lease payments equals the fair value of the asset. As of December 31, 2019, the pipeline lateral assets owned by Piedmont had a current net investment basis of $4 million and a long-term net investment basis of $70 million. 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 contract as a finance lease. The activity for this contract is eliminated in consolidation at Duke Energy.

The following table presents the components of lease expense.



	Year Ended December 31, 2019
			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)	$	292	$	47	$	161	$	69	$	92	$	11	$	20	$	5
Short-term lease expense^(a)	16		5		9		4		5		1		2		—
Variable lease expense^(a)	47		22		22		16		6		—		1		1
Finance lease expense
Amortization of leased assets^(b)	111		6		21		5		16		1		—		—
Interest on lease liabilities^(c)	61		15		42		33		9		—		1		—
Total finance lease expense	172		21		63		38		25		1		1		—
Total lease expense	$	527	$	95	$	255	$	127	$	128	$	13	$	24	$	6


(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.


(c)	Included in Interest Expense on the Consolidated Statements of Operations.

The following table presents rental expense for operating leases, as reported under the former lease standard. These amounts are included in Operation, maintenance and other and Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.



	Years Ended December 31,
(in millions)	2018		2017
Duke Energy	$	268	$	241
Duke Energy Carolinas	49		44
Progress Energy	143		130
Duke Energy Progress	75		75
Duke Energy Florida	68		55
Duke Energy Ohio	13		15
Duke Energy Indiana	21		23
Piedmont	11		7

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



	December 31, 2019
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
2020	$	268		$	31		$	123		$	51		$	72		$	2		$	5		$	5
2021	216			19			99			44			55			2			4			5
2022	201			19			95			40			55			2			4			5
2023	191			17			95			41			54			2			4			5
2024	176			13			95			41			54			2			4			5
Thereafter	984			57			462			283			179			21			64			5
Total operating lease payments	2,036			156			969			500			469			31			85			30
Less: present value discount	(396		)	(27		)	(177		)	(109		)	(68		)	(9		)	(27		)	(3		)
Total operating lease liabilities^(a)	$	1,640		$	129		$	792		$	391		$	401		$	22		$	58		$	27


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

The following table presents future minimum lease payments under operating leases, which at inception had a noncancelable term of more than one year, as reported under the former lease standard.



	December 31, 2018
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
2019	$	239	$	33	$	97	$	49	$	48	$	2	$	6	$	5
2020	219		29		90		46		44		2		5		5
2021	186		19		79		37		42		2		4		5
2022	170		19		76		34		42		2		4		5
2023	160		17		77		35		42		2		5		6
Thereafter	1,017		68		455		314		141		23		66		11
Total	$	1,991	$	185	$	874	$	515	$	359	$	33	$	90	$	37

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



	December 31, 2019
				Duke						Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Indiana
2020	$	181		$	28		$	69		$	44		$	25		$	1
2021	186			23			69			44			25			1
2022	173			23			69			44			25			1
2023	175			23			69			44			25			1
2024	121			23			55			44			11			1
Thereafter	823			314			539			528			11			27
Total finance lease payments	1,659			434			870			748			122			32
Less: amounts representing interest	(690		)	(255		)	(465		)	(441		)	(24		)	(22		)
Total finance lease liabilities	$	969		$	179		$	405		$	307		$	98		$	10

The following table presents future minimum lease payments under finance leases, as reported under the former lease standard.



	December 31, 2018
				Duke						Duke			Duke			Duke		Duke
	Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana
2019	$	170		$	20		$	45		$	20		$	25		$	2	$	1
2020	174			20			46			21			25			—		1
2021	177			15			45			20			25			—		1
2022	165			15			45			21			24			—		1
2023	165			15			45			21			24			—		1
Thereafter	577			204			230			209			21			—		27
Minimum annual payments	1,428			289			456			312			144			2		32
Less: amount representing interest	(487		)	(180		)	(205		)	(175		)	(30		)	—		(22		)
Total	$	941		$	109		$	251		$	137		$	114		$	2	$	10

The following tables contain additional information related to leases.



		December 31, 2019

				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	$	1,658	$	123	$	788	$	387	$	401	$	21	$	57	$	24
Finance	Net property, plant and equipment	926		198		443		308		135		—		7		—
Total lease assets		$	2,584	$	321	$	1,231	$	695	$	536	$	21	$	64	$	24
Liabilities
Current
Operating	Other current liabilities	$	208	$	27	$	95	$	37	$	58	$	1	$	3	$	4
Finance	Current maturities of long-term debt	119		7		24		6		18		—		—		—
Noncurrent
Operating	Operating lease liabilities	1,432		102		697		354		343		21		55		23
Finance	Long-Term Debt	850		172		381		301		80		—		10		—
Total lease liabilities		$	2,609	$	308	$	1,197	$	698	$	499	$	22	$	68	$	27



	Year Ended December 31, 2019

			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	$	285	$	34	$	131	$	53	$	78	$	2	$	7	$	7
Operating cash flows from finance leases	61		15		42		33		9		—		1		—
Financing cash flows from finance leases	111		6		21		5		16		1		—		—

Lease assets obtained in exchange for new lease liabilities (non-cash)
Operating^(b)	$	194	$	44	$	30	$	30	$	—	$	—	$	—	$	1
Finance	251		76		175		175		—		—		—		—


(a)	No amounts were classified as investing cash flows from operating leases for the year ended December 31, 2019.


(b)	Does not include ROU assets recorded as a result of the adoption of the new lease standard.



	December 31, 2019

			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	11		9		10		12		8		17		18		6
Finance leases	13		19		16		18		11		—		26		—
Weighted average discount rate^(a)
Operating leases	3.9	%	3.5	%	3.8	%	3.9	%	3.8	%	4.2	%	4.1	%	3.6	%
Finance leases	8.1	%	11.8	%	11.9	%	12.4	%	8.3	%	—	%	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