2009 Results

Last year was difficult for both our customers and our industry. On a weather-normalized basis, our customers’ demand for power was down approximately 4 percent, primarily due to declines in manufacturing load. Cooler summers in both the Midwest and the Southeast also reduced electricity demand.

We can’t control the economy or the weather, so throughout the year, we focused on what we could control. We aggressively managed our costs — reducing our planned operating and maintenance expenses by more than $150 million, exceeding our $100 million target.

Our regulated operations also maintained high operational performance. Our nuclear fleet had one of the best years in its history, and our fossil plants had their best year for availability and reliability in 10 years.

Our commercial businesses include our growing renewable energy portfolio, our international assets in Latin America, our competitive fossil generation and retail sales business in Ohio, and our natural gas generation in the Midwest. Last year, in total, our commercial businesses increased both earnings and cash flows.

In our renewables business, we added just over 360 MW of wind power and ended 2009 with approximately 735 MW in commercial operation. In Latin America, our 4,000 MW of highly contracted hydroelectric and gas plants generated strong cash flows and earnings.

In Ohio, the recession drove down wholesale power prices, and competitors set out to undercut our locked-in rates. We met this challenge by launching a strategy to attract customers seeking competitive suppliers with our own competitive retail supplier, Duke Energy Retail Sales. As you would expect, this required us to reduce our margins in order to retain some of our customers. In 2010, we will continue our efforts to mitigate customer switching, as well as position and maximize the value of our Ohio and Midwest businesses in the wholesale generation market.

With our sizable investments to modernize our energy infrastructure, capital is our lifeblood. Thanks to our strong balance sheet, we had remarkable access to the capital markets. We issued $3.75 billion of fixed-rate debt at an average 5.2 percent interest rate in 2009. Over the past two years, we issued more than $7 billion of fixed-rate debt at favorable rates and terms, and $600 million of equity through our dividend reinvestment plan (DRIP) and other internal plans. At year-end, our debt to total capitalization ratio was 44 percent, and we maintained our investment-grade corporate credit ratings.

Due to our employees’ extraordinary efforts last year, we exceeded our 2009 employee incentive target by 2 cents, earning $1.22 per share on an adjusted diluted basis. Reported diluted earnings per share (EPS) were 83 cents for 2009.

Our total shareholder return — the change in stock price plus dividends — was up 22 percent for the year. That compares favorably with the Philadelphia Utility Index (made up of 20 peer companies, including Duke Energy), which was up only 10 percent in 2009. Over the past three years, Duke Energy has achieved a positive 4 percent shareholder return, while the utility index dropped nearly 5 percent.

Comparison of 2009 Total Shareholder Return
(12 months ended Dec. 31, 2009)

Chart: Comparison of Total 2009 Return

Our total shareholder return — the change in stock price plus dividends — was up 22 percent for the year. That compares favorably with the Philadelphia Utility Index (made up of 20 peer companies, including Duke Energy), which was up only 10 percent in 2009. Over the past three years, Duke Energy has achieved a positive 4 percent shareholder return, while the utility index dropped nearly 5 percent.

Even though our adjusted earnings have been essentially flat over the last three years, we grew our dividend an average of approximately 4 percent each year during this period.

The one area where we didn’t meet expectations is employee and contractor safety. After a fatality-free 2008, we suffered three contractor deaths in 2009. This reminds us of the hazards involved in bringing energy to millions of people. Even though our injury rate trended to the lowest it’s ever been, any injuries or fatalities are unacceptable. I have challenged all of our employees and contractors to redouble their efforts in this area.

For the fourth year in a row, Duke Energy was named to the Dow Jones Sustainability Index for North American companies in the electric utility sector. Early in 2010, Corporate Knights magazine named us one of the 100 most sustainable companies in the world. And, in March 2010, we were named one of the 100 Best Corporate Citizens for the second consecutive year by Corporate Responsibility (CR) magazine.

I invite you to review our 2009|2010 Sustainability Report, available on www.duke-energy.com, to learn more about our commitment to do business in ways that are good for people, the planet and profits.