11. Debt and Credit Facilities

Print

		Debt		Weighted  Average Rate				Year Due				December 31,
												2002				2001
												(in millions)
		Unsecured debt (a)			6.7	%			2003—2038			$	16,222				9,334
		Secured debt			4.2	%			2003—2027				2,654				200
		Commercial paper and extendible commercial notes (ECNs) (b),(c)			2.1	%							2,030				2,987
		First and refunding mortgage bonds			6.8	%			2003—2033				690				790
		Other debt (d)			2.5	%			2005—2017				514				853
		Capital leases			9.0	%			2006—2032				339				105
		Fair value hedge carrying value adjustment (e)							2003—2032				123				22
		Unamortized debt discount and premium, net											(107	)			(106	)
		Total debt (f)											22,465				14,185
		Current maturities of long-term debt											(1,329	)			(261	)
		Short-term notes payable and commercial paper (g)											(915	)			(1,603	)
		Total long-term debt										$	20,221			$	12,321

Unsecured debt, secured debt and other debt included $3,545 million of floating-rate debt as of December 31, 2002, and $879 million as of December 31, 2001. Floating-rate debt is primarily based on a spread relative to an index such as a London Interbank Offered Rate for debt denominated in U.S. dollars, Banker’s Acceptances for debt denominated in Canadian dollars and a Bank Bill Swap reference rate for debt denominated in Australian dollars. As of December 31, 2002, the average interest rate associated with floating-rate debt was 3.2%.

Other debt included $282 million related to a loan with D/FD as of December 31, 2002, and $568 million as of December 31, 2001. As part of the D/FD partnership agreement, excess cash is loaned at current market rates to Duke Energy and Fluor Enterprises, Inc. The weighted-average rate of this loan was 2.5% as of December 31, 2002 and 4.05% as of December 31, 2001.

As of December 31, 2002, secured debt consisted primarily of various project financings, including THOR Investors, LLC (THOR) (see Note 14), P.T. Puncakjaya Power, Duke Energy Western Australia Holdings, Duke Australia Pipeline Finance Pty Ltd., Maritimes & Northeast Pipeline, LLC, Maritimes & Northeast Pipeline, LP, Empire State Pipeline and certain projects at Crescent. A portion of the assets, ownership interest and business contracts in these various projects are pledged as collateral. Additionally, as of December 31, 2002, substantially all of Franchised Electric’s electric plant in service was subject to a mortgage lien securing the first mortgage bonds.

In February 2003, Duke Energy issued $500 million of 3.75% five-year first and refunding mortgage bonds due in 2008 in a private placement transaction exempt from registration under Rule 144A of the Securities Act of 1933, as amended (Securities Act). The bonds are subject to a registration agreement, whereby Duke Energy has agreed to register an exchange with the holders of identical bonds under the Securities Act. The proceeds from this issuance were used to repay short-term debt, replace $100 million of Duke Energy’s first and refunding mortgage bonds that matured in February 2003, to repay approximately $200 million of an intercompany loan from Duke Capital Corporation and for general corporate purposes. Additionally, in February 2003, Duke Energy’s Securities and Exchange Commission (SEC) shelf registrations were increased to $2,500 million.

		Annual Maturities
				(in millions)
		2003		$	1,329
		2004			1,311
		2005			2,728
		2006			2,490
		2007			724
		Thereafter			12,968
		Total long-term debt (a)		$	21,550

Annual maturities after 2007 include $2,610 million of long-term debt with call options, which provide Duke Energy with the option to repay the debt early. Based on the years in which Duke Energy may first exercise its redemption options, it could potentially repay $1,760 million in 2003, $500 million in 2004, $100 million in 2005 and $250 million in 2006.

In 2000, Duke Energy issued $250 million of 7.125% senior unsecured bonds due in 2012, with a put option that gave investors the choice to put the bond to Duke Energy at par value in September 2002 or extend the maturity until 2012. In September 2002, Duke Energy refinanced the senior unsecured bonds with private debt securities and paid approximately $43 million to buy back the option to extend the maturity of the bonds. The private debt securities were subsequently repaid in October 2002 by the issuance of $350 million of 6.45% senior unsecured notes due in 2032. The cost of the option will be amortized over the life of the $350 million senior unsecured notes.

In 2000, Duke Capital Corporation issued $150 million senior unsecured bonds due in 2003 that may be required to be repaid if Duke Capital Corporation’s senior unsecured debt ratings fall below BBB at Standard & Poor’s (S&P) or Baa2 at Moody’s Investors Service (Moody’s). Additionally, $21 million of Duke Energy’s senior unsecured notes which mature serially through 2011 may be required to be repaid if Duke Energy’s senior unsecured debt ratings fall below BBB- at S&P or Baa3 at Moody’s, and $33 million of Duke Energy’s senior unsecured notes which mature serially through 2016 may be required to be repaid if Duke Energy’s senior unsecured debt ratings fall below BBB at S&P or Baa2 at Moody’s. As of February 28, 2003, Duke Energy’s senior unsecured credit rating was A- at S&P and A3 at Moody’s, and Duke Capital Corporation’s senior unsecured credit rating was BBB+ at S&P and Baa2 at Moody’s.

The following table summarizes Duke Energy’s credit facilities and related amounts outstanding as of December 31, 2002. The majority of the credit facilities support commercial paper programs. The issuance of commercial paper, letters of credit and other borrowings reduces the amount available under the credit facilities. Amounts related to outstanding commercial paper and other borrowings in the following table are included in the previous long-term debt table.

Credit Facilities Summary as of December 31, 2002

				Expiration Date			Credit Facilities Available				Amounts Outstanding
											Commercial Paper				Letters of Credit				Other Borrowings				Total
				(in millions)
		Duke Energy
		$475 364-Day    syndicated (a)(b)		August 2003
		$475 Multi-year    syndicated (a)(b)		August 2004
		Total          Duke Energy					$	950			$	882			$	—			$	—			$	882
		Duke Capital    Corporation
		$500 Temporary    bilateral (b)(c)		June 2003
		$700 364-Day    syndicated (a)(b)(c)		August 2003
		$500 364-Day    syndicated    letter of    credit (a)(b)(c)		April 2003
		$142 364-Day    bilateral (a)(b)(c)		August 2003
		$550 Multi-year    syndicated (a)(b)(c)		August 2004
		$538 Multi-year    syndicated    letter of    credit (b)(c)		April 2004
		Total          Duke          Capital          Corporation						2,930				570				580				—				1,150
		Westcoast Energy Inc.
		$158 364-Day    syndicated (a)(b)		December 2003
		$127 Two-year    syndicated (b)		December 2004
		Total          Westcoast          Energy Inc. (d)						285				57				—				—				57
		Union Gas Limited
		$380 364-Day    syndicated (e)		July 2003				380				124				—				—				124
		Duke Energy    Field Services,    LLC
		$650 364-Day    syndicated (a)(f)		March 2003				650				215				—				—				215
		Duke Australia    Pipeline    Finance    Pty Ltd.
		$198 364-Day    syndicated (g)		February 2003
		$177 Multi-year    syndicated		February 2005
		Total          Duke          Australia          Pipeline          Finance          Pty Ltd. (h)						375				182								128				310
		Total					$	5,570			$	2,030			$	580			$	128			$	2,738

Existing bank credit facilities as of December 31, 2002 are not subject to minimum cash requirements. In addition, in October 2002, Duke Energy secured an option to borrow up to $500 million in February 2003 for a period ending no later than November 2003. In February 2003, this option was amended to allow Duke Energy to borrow up to $250 million between June 30, 2003 and August 29, 2003. Any amounts borrowed would be due no later than March 31, 2004. Also, Duke Energy is currently maintaining a minimum cash position of $500 million at Duke Capital Corporation to be used for short-term liquidity needs. This cash position is invested in highly rated, liquid, short-term money market securities.

Duke Energy has approximately $3,700 million of credit facilities which mature in 2003. It is Duke Energy’s intent to reduce its need for these facilities as the year progresses and thus resyndicate less than the total $3,700 million.

Duke Energy’s credit agreements contain various financial and other covenants. Failure to meet those covenants beyond applicable grace periods could result in acceleration of due dates of the borrowings and/or termination of the agreements. As of December 31, 2002, Duke Energy was in compliance with those covenants. In addition, certain of the agreements contain cross-acceleration provisions that may allow acceleration of payments or termination of the agreements upon nonpayment or acceleration of other significant indebtedness of the applicable borrower or certain of its subsidiaries.

©Copyright 2003

back topnext