Good day, and welcome to the Duke Energy’s Fourth Quarterly Earnings Call. Today’s call is being recorded. At this time, I would like to turn the conference over to Bill Currens. Please go ahead.

Thank you, Ruth. Good morning, everyone, and welcome to Duke Energy’s fourth quarter and full-year 2014 earnings review and business update. Leading our call is Lynn Good, President and CEO, along with Steve Young, Executive Vice President and Chief Financial Officer. Today’s discussion will include forward-looking information and the use of non-GAAP financial measures. Slide 2 presents the Safe Harbor statement which accompanies our presentation materials. A reconciliation of non-GAAP financial measures can be found on our website at duke-energy.com and in today’s materials. Please note that the appendix to today’s presentation includes supplemental information and additional disclosures to help you analyze the company’s performance and our financial forecast. As listed on Slide 3, Lynn will begin with a review of our key 2014 activities as well as an update on our strategic initiatives within the commercial businesses. Then Steve will review our 2014 financial results to present our 2015 financial plan and discuss our longer term adjusted earnings growth expectations. Before I turn it over to Lynn, let me a take brief moment to give you a staffing update on the Duke IR team. It is with mixed emotions that I announced this is Beau Pratt’s last earnings call. After three new responsibilities within our financial organization this is a great move for Beau and for Duke Energy, but I will surely miss Beau’s knowledge, tireless passion for excellence, as well as his endless smile. Beau, thank you for all you have done in helping us advance our mission to continually provide a high level of service to the investment community. With that, I will turn the call over to Lynn.

Good morning, everyone and thanks for joining us. In 2014, we built upon the momentum we created in 2013 celebrating key milestones and addressing challenges. We continued building our financial track record, achieving our adjusted earnings guidance range and increasing our important dividend payment to shareholders. We announced several growth initiatives that will position the company for the future and completed our strategic review of the international business. In August, we entered into a sale agreement with Dynegy for our commercial Midwest generation portfolio. We also advanced our coal ash management practices and as I will discuss in a moment we are close to an agreement with the government to resolve the ongoing grand jury investigation into our coal ash basin management. Today, we initiated our 2015 adjusted EPS guidance range of $4.55 to $4.75, and also extended our long-term adjusted earnings per share growth objective of 4% to 6% through 2017. This guidance reflects strong growth in our regulated utilities offset by near-term headwinds from foreign exchange rates and oil prices in our international business. Steve will provide further details about our financial plan in a few minutes. Let me review a few operational highlights outlined on Slide 4, including our progress on ash basin closure strategies and Edwardsport. Our fleet and grid performed well during 2014, especially during the demands of the polar vortex last winter. Our regulated nuclear fleets set a new net generation record and achieved an annual capacity factor of 93%, the 16 consecutive year above 90%. We continue to deliver significant benefits from the 2012 merger and we are on track to achieve the $687 million of savings for our Carolinas customers over the first five years of the merger. In fact, 2.5 years into the merger we have generated over 60% of the…

Thanks, Lynn. Today, I’ll review our full-year 2014 results to discuss the economic conditions within our service territories, including customer volume trends. I will conclude with our financial plan for 2015 and our longer-term adjusted earnings growth expectations. Let’s start with 2014 results as outlined on Slide 8. My comments were focused on the year-to-date results versus our original plan for the year. For more detailed information on variances versus last year. Please refer to the supporting materials of the company’s today’s press release. We achieved 2014 adjusted diluted earnings per share of $4.55 within our revised guidance range of $4.50 to $4.65. On a reported basis 2014 earnings per share were $2.66 compared to $3.76 last year. The difference between reported and adjusted earnings per share for 2014 is primarily driven by three items. Approximately $930 million of pretax impairments taken on the Midwest Generation Fleet of $373 million tax charge recognized this quarter associated with our plans to return cash from international and an approximate $100 million charge related to potential financial exposure to resolve the ongoing federal grand jury investigation. Overall, I am pleased with our ability to achieve our revised guidance range for 2014, despite facing some challenges throughout the year. Our regulated businesses exceeded their 2014 plan by about $40 million due to favorable weather partially offset by emerging cost, the winter storm respiration in coal ash related activities. Absent these cost O&M and Regulated Utilities would have been slightly lower than 2013. The Commercial Power segment fell slightly short of plan for the year. Largely due to higher purchased power cost to our competitive retail business during the first quarter polar vortex and outages at the Midwest Generation Fleet. This decline was partially offset by the renewables business which delivered around $60 million of…

[Operator Instructions] We’ll go first to Dan Eggers with Credit Suisse.

Hey, good morning, guys.

Hi, Dan.

Good morning.

Now that you've gotten through the review on the international assets and you have reiterated the 4% to 6% EPS growth target, how do we think about the balance of growth? Because I assume you guys are embedding little or no growth international, which means the domestic businesses are actually going to grow faster than 4% to 6%. Is that fair?

Dan, we continue to look for ways to invest capital. So you will find some growth capital and our expectations and international, but given the fact that it’s roughly 10% of the business you can expect greater growth, the lion share of the growth coming from regulated. The only other thing I would add that is as I think about regulated earnings growth is not just the utilities I think you put the pipeline into that category as well FERC regulated growth item that will show up in commercial, but nonetheless its important to the growth picture.

And then I guess kind of from a treatment from an earnings perspective from the international because you guys took the charge in the fourth quarter, there's going to be no change in realized tax rate even as you bring international earnings back to the U.S. because I guess you guys front-end loaded the tax payment. Is that the right way to think about what you guys did?

Yes, that’s correct what we’ve done is recognize the income tax liability associated with historic earnings. Prospectively we will not include any U.S. income taxes. And we are projecting that our effective tax for 2015 will be about 32%.

Okay, just one last question. Just on the renewable investments, you had Dominion at their analyst day who said that they were going to keep investing for another year or two and then look to monetize those renewable businesses, given the fact the lower EPS contribution to asset deployed. How does that fit to you guys' thoughts on investment in that business and the right fit for you relative to maybe some of these yieldco folks who can pay more for a similar set of assets?

Dan I think there are a couple of questions in here, one our competitive positioning and then what is the long-term strategic set of renewables. And we continue to see it as an important place for us to deploy capital. We see growth in that area, but like any element of our business from time-to-time will set back and see where it fits and how does that optimize value, but that’s as far as I would go at this point, overall we see renewables becoming an increasingly part of the generation portfolio. And we’ll continue deploying capital in a manner that creates the most value for our shareholder.

Great. Thank you guys.

Thank you.

Thank you.

We’ll go next to Michael Weinstein with UBS.

Hey, it’s Julien. Good morning.

Good morning, Julien.

Julien also known as Michael. How are you?

Thank you quite well. I wanted to perhaps follow up on Dan's question there, and kind of come back to the 4% to 6% for 2016 and 2017. Is that weighted towards 2017, or are you really think about a real pickup next year? If so, what are those drivers as you think about the domestic businesses? To what extent does capital deployment also drive some of that improvement, 2015 to 2016?

Julien, I would point to guidance for 2015 and then the long-term growth rate of 4% to 6%. And we’ve given you some visibility and what you are going to see in 2016, so we hope to close the Eastern Power Agency. We will begin showing earnings from other launch from capital deployment, we have certain things that will occur on riders. So I think we’ve given you the pieces, we aren’t prepared to give specific guidance on 2016 today, but we feel like we’ve developed the pipeline that will drive growth into the future.

But to be specific here, is 2016 kind of the improvement, or ultimately you are not ready to say 2016 versus 2017 to get to that 4% to 6%?

I don’t think we want to get into 2016 versus 2017 at this point, but what I would describe to you is that the growth portfolio is strong, we are projecting to be investing an average of $8 billion a year. 2014 was a relatively low capital year and that’s just the nature of the business in terms of the timing of the resources you need for your regulated business when you are closing deals. We are looking at 2016 being nearly $10 billion of investment and you include the NCEMPA acquisition. And our rate base is growing, our regular rate base growing 6%. So it’s hard to know exactly how that will manifest itself through rates riders AFUDC exactly, but the investment base is growing.

Great, and a small detail here. You said you expect that the Midwest transaction would close midyear. Is that a reflection on an any more bearish view on timing, or is it really kind of – or could potentially be a little earlier than that?

Julien it’s a planning assumption. I think what the accelerated common period that FERC put forward in the settlement that Dynegy has reached with the market monitor, we believe closing could occur more rapidly, but for planning assumptions we put it into the second quarter and we’ll update as events unfold. It’s difficult to predict with certainty FERC’s timeline.

. :

Thanks, so much.

Thank you.

We will go next to Brian Chin with Bank of America.

Hi, good morning.

Good morning, Brian.

Good morning, Brian.

Just to springboard off Julien and Dan's questions, for the recovery of the EPS trajectory back to 2016 from 2015, the way I took your prepared comments there is a little bit of a drag in 2015 on FX and oil. So is some bounceback on those assumed in the 2016 guidance, or is it your view that the growth portfolio is strong enough to account for an FX oil price environment that sort of perpetuates from 2015 onwards, and you still get back to the 4% to 6% trajectory?

Yes, Brian what I would say we’ll be closely watching oil prices for example I do not - we do not believe that the level we are at today will persist, in Steve’s remarks we set into 2017 we also are not projecting they persist into 2016 at this level either. So we have a combination of things in our portfolio that we think will come together, but I think directing attention to the investments is important because that’s going to be the most significant driver of growth over the long-term for the company.

Great. Thank you very much.

Thank you.

Thank you.

We’ll go next to Jonathan Arnold with Deutsche Bank.

Good morning.

Good morning.

Hi, Jonathan.

Quick question, just so I understand what you have done on repatriation. You described it as a tax-efficient solution, but then you seem to be booking what I guess is a worst-case scenario on tax. What happens if there is some form of a tax holiday going forward? Will you then release some of this reserve? And because you have structured it as a note, does that effectively help with this? Could you just put some light on that comment?

Sure, let me give a little color to that, we booked roughly $370 million in the fourth quarter related to this. And that reflects a tax efficient structure, we don’t expect before 2016 any comprehensive tax legislation, there are various proposals that are kicked about and in fact President Obama’s proposal talks about 19% tax on repatriated earnings which would be less efficient then what we put in place. So I think we have maximized our ability to utilize foreign tax credits and taking advantage of our tax positioning pretty well with this structure.

Okay, so there's not a potential for it to improve, or is there? That's kind of like?

Well, I think that we’ve recognized the right liability based on our historic earnings and it basically represents kind of a top off tax between foreign tax amounts accrued and paid and the U.S. tax rate and what is also unique here is that we will not be approving any U.S. income taxes perspectively which helps as well.

Okay, and then another topic on wholesale. I think I heard you say $0.10 of wholesale may come in 2015, on top of $0.06 in 2014. Does some of that carry forward into 2016 on a full-year basis, and just what you would think about 2016 and 2017 on the wholesale line?

As we move forward 2014 and 2015 were big years where we stepped into wholesale contracts, so we saw some nice growth there. That will level out a bit after 2015. We will continue to see some growth in wholesale as our existing contracts grow and we step into some smaller ones, it won’t be at the level that we have seen in 2014 and 2015.

Okay, great. Thank you guys.

Thanks Jonathan.

Thank you.

We will go next to Michael Lapides from Goldman Sachs.

Yes, hey guys, congrats on a good year.

Hi Mike.

Okay.

Just a question on Slide 23, and then kind of thinking about core growth in net income versus growth in EPS. Your regulated utility growth is about 2%, kind of as you outline on this slide. Commercial power has $90 million of kind of nonrecurring benefit in it in 2015, meaning that won't be there in 2016. Just curious when you think about drivers of the 4% to 6% longer-term, how much of that is driven by just longer-term continued reductions in the share count? Or do you view this as kind of a one-time buyback that's being done now and then there's no more kind of major capital allocations outside of dividends on the equity side of the balance sheet going forward?

You know Michael, we are certainly going to use balance recapitalization to address the accident of the Midwest generation business. We think that is an appropriate utilization of proceeds given where we are at this point. I think what you can expect on regulated utilities is that growth will be lumpy at time for lack of a more sophisticated word, because of capital deployment rate case is another thing. So as you look at 2015 it’s a no rate case year, and so we would expect growth to accelerate there around reflection of the earnings from the investments we're putting in place. We also expect commercial will grow as we continue to put renewable investment to work and as the pipeline begins to show up. So I think we could talk to each of these individually, but there will be growth that shows up from deployment of investment and this is share repurchase we think it’s consistent with the exit of a business.

Okay, just to sanity check one thing on the pipeline; will you be booking AFUDC earnings during construction? So the earnings impact will actually happen before the pipeline goes in service?

Yes, that’s correct, we will Michael.

Got it, thanks guys. Much appreciated.

Thanks, so much.

Sure.

We will go next to Chris Turnure with JP Morgan.

Good morning Lynn and Steve.

Good morning.

Hello.

I just wanted to talk a little bit more about 2015 at the regulated utilities first. We've talked about it a lot so far, but just I would've expected a little bit more growth even without a rate case there, given the fact that you are getting the load growth and all of that wholesale growth even though weather normalization is going to hurt you. And then you also mentioned a couple pennies of a tax hit as well. Is there anything else within 2015 specifically that we might be missing there?

I think typically when you look at 2015 for the regulated utilities you got the organic load growth that we are looking at for the retail, the wholesale those are pieces there. We should have some growth from Riders and AFUDC as investments build. But again 2014 was a low capital year so we are just starting to build the tank on some of these larger investments such as the lead combined cycle in the Citrus County. So there maybe lag in some of that build up that you see in 2015 relative to where we are going to be in 2016 and 2017 and maybe a part of it there. And then there is what we call rate lag, if you will, and that’s O&M which we are trying to hold in check and have had success doing that thus far, but there is always emergent cost that have to be dealt with. And then there is additional depreciation and interest on capital projects – smaller capital projects that go into service prior to a rate case. So those are kind of the major components. And I think that one of the things you maybe also factoring in is nuclear levelization, which impacts our O&M in an unusual fashion we got a large benefit in 2013 from nuclear levelization as we started to levelize nuclear outage costs. And that has negative impacts in 2014 and 2015. After 2015 we will be through with that and it won’t be a driver.

Okay. Then if we look at the drivers for the international segment for 2015, you do say that you are assuming normal hydrology throughout the balance of the year or the entire year overall. It doesn't look like that is much of a driver, though, in terms of EPS. We have the crude headwinds and the forex headwinds, but should we not be thinking about that helping earnings a lot this year?

Well, I think you hit the major drivers which are the FX in the crude for international, when you look at hydrology in Brazil I think we are assuming normal hydrology, but I think even under normal hydrology the thermals will be dispatched first throughout the year, that would put some constrains on our hydro generation capabilities or contract pricing does grow and those contracts are profitable. But given the thermal dispatching order even under normal hydrology coming out of two years of drought that will constrict some of our ability to make sales into the spot market. So there is some offsetting things there in Brazil. I think you hit the big drivers for international with FX in oil pricing.

Okay, great. Thanks a lot.

Thank you.

Thank you.

[Operator Instructions] We’ll go next to Ali Agha with SunTrust.

Thank you, good morning.

Good morning.

Steve, in your 2015 guidance you gave us your assumptions for crude – for oil price as well as the FX in Brazil. Can you remind us what the sensitivities are around that base assumption?

Yes, the 10% movement on the price of oil is in the neighborhood of $0.01 to $0.02 and that’s an annual basis.

$10.

$10 on the price - thinking of the oil always remain on a $100 and then 10% movement on FX rates for the entire year is in the neighborhood of $0.03.

Okay. And then secondly for the NCEMPA acquisition, I see that you have assumed $0.05 to $0.10 of earnings. Why is there that $0.05 delta in that contribution? I would have thought it would be fairly set once you complete that acquisition.

And those assumptions around financing basically, if it were finance entirely with cash, then you would be at the upper end of that range, if it were financed 50% at holdco debt and you would be at the lower end of that range. So we are just incorporating some financing sensitivities there.

I see. Then lastly, Lynn, coming back to the international business, once you have brought that cash back in and you've managed it well that way, going forward your exposure oil price, what about what happens to hydro and the remaining out in Brazil with FX going? There's still that variability out there. From an earnings perspective, I don't hear much about that it's going to grow like your regular business does. So strategically, would that still fit the profile that you're trying to create here with stable, visible, predictable earnings and dividend growth?

I think you raise a good question and certainly as we undertook the strategic review we were looking at both elements, we were looking at cash optimization and we are looking at growth. I think we came up with an outstanding solution around cash and I think its particularly time really when you think about the level of capital spending and projects we’ve identified in the domestic business, but we do have some near-term headwinds from our growth perspective. The NMC investment was not a part of the strategic review, that’s a joint venture that we are in and towards the later part of the 2020s and so we will continue to have some volatility around oil prices. And I think the business in Latin America we do have some foreign currency, we have hydrology in the short-term, but we believe that this markets represents strong markets over the long-term and we will continue to look for ways we can optimize value out of that portfolio. I think stepping back from all of that we should also recognize that this only 10% of Duke’s business.

Right, but we are done with the review. This is not something you will come back another year or two. I mean this was pretty comprehensive and we are done for now?

We are done for now.

Great, thank you.

Thank you.

We’ll go next to Paul Patterson with Glenrock Associates.

Good morning, Paul.

Good morning, can you hear me? How are you?

Hi.

Yes, good.

Just a follow-up on the oil and currency expectations post-2015. As you know, the forward curve is sloping upward to begin with. So I was just wondering when you say that you don't expect them to stay at these low levels, are you talking about the forward curve in general? In other words, do you have an expectation above the forward curve or and to get and through get best for the most part right now or is this just you are just commenting on the fact that the forward curve goes up considerably in the next few years?

Yes, so we use the fund with the forward curves, Paul to plan our business, we’ll of course look at sensitivities around that, but we do not have an independent market view.

Okay, great. Then with respect to the sale of the Dynegy, I think Julien was asking about this. If you guys were to sell it earlier, considerably earlier, would that have a material impact on 2015?

No that would not have a material impact you include some of the earnings from the Midwest gen from that period of time, the recapitalization benefits we kick in earlier in the net of those two is immaterial.

Okay, that's it. The rest of my questions have been asked. Thanks a lot.

Thanks so much.

Our last question comes from the line of Andy Levi with Avon Capital.

Hi good morning.

Hi Andy.

Hey Andy.

Hi, how are you doing?

Good.

Good.

Just one clarification on the wholesale at the utilities, or really I guess at the Carolina utilities. How does that work in a rate case? Because you have your growth and then you said there was like growth in – smaller growth in 2016 and 2017. But if you file a rate case in, let's say, North Carolina, is there some type of true-up? I'm just trying to remember.

There is not a true-up, let me – some of the mechanics I’ll explain, when you file a rate case you will typically look at who are your firm customers retail and wholesale and you will allocate costs in that fashion and in the states we will set retail rates based upon those cost allocated to the retail customer load. So the existence of firm wholesale does impact base rate allocations.

On a perspective basis.

But perceptively you do don’t go back and say well let's redo the allocations in the past.

Okay. So for like modeling purposes – I'm just throwing out numbers – let's say there was a $0.15 benefit over a two-year or three-year period in between the rate cases. You don't lose that $0.15, but I guess it gets taken out on the retail side. So if you were going to have, I don't know, a $200 million rate increase, there's some type of adjustment on the retail side to compensate for the benefit on the wholesale side. Is that kind of the way to look at it?

Perceptively that’s the way to look at it. Yes, you will reallocate cost based on your retail and wholesale customers again on a perspective basis.

And is there a way for us to figure that out, or that's too complicated for us?

Andy I think offline the IR team could talk you through that but I think we are talking about something that’s two or three years down the road and probably a better conversation as we get closer to the rate cases.

Great, okay. Thank you very much.

Thanks so much.

Good. End of Q&A

Okay, I want to thank all of you for joining the call today and for your interest in Duke Energy. We look forward to seeing many of you in March as we pursue and attend many of the conferences. So thanks again.

This does conclude today’s conference call. Thank you for your participation. You may now disconnect.