Good day and welcome to the Duke Energy second quarterly earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Bob Drennan. Please go ahead, sir.

Thank you, Jim. Good morning, everyone, and welcome to Duke Energy's second quarter 2013 earnings review and business update. Leading our call this morning is Lynn Good, Duke Energy's President and Chief Executive Officer. Today's discussion will include forward-looking information and the use of non-GAAP financial measures. Slide two presents the Safe Harbor statement which accompanies our presentation materials. You should also refer to the information in our 2012 10-K and other SEC filings concerning factors that could cause future results to differ from this forward-looking information. A reconciliation of the non-GAAP financial measures can be found on our website at www.duke-energy.com and in today's materials. Please note that the appendix to today's presentation include supplemental information and additional disclosures to help you analyze the company's performance. Today, Lynn will provide an in-depth review of the second quarter results and also perspectives on our expectations for the rest of the year. She will also take your questions following her prepared remarks. This morning, we announced adjusted diluted earnings per share for the second quarter of $0.87, compared to $1.02 for the same quarter a year ago. Principal drivers of the lower quarter-over-quarter adjusted results were less favorable weather at our utilities compared to last year, reduced contributions from our Midwest coal and gas commercial operations and lower contribution from international operations, primarily due to an extended maintenance outage at a National Methanol investment. These drivers were partly offset on positive revenue contributions from recently approved rate cases in North Carolina and Ohio. Also this morning, we all are reaffirming Duke Energy's previously announced adjusted earnings guidance range for 2013 of $4.20 to $4.45 per share. Now, I would like to turn the call over the Lynn.

Thank you, Bob, and good morning. I want to thank all of you for joining our call today. I am pleased to be joining you as the President and CEO of Duke Energy. As many of you know, Jim Rogers who has left one of his predecessor companies for nearly 25 years will remain Chairman through the end of this year. I am grateful to Jim for his encouragement and support over the years and I am deeply honored by the confidence the board has placed in me. As well, I want to thank you for your support in the past and for the messages that I have received since this announcement. Also, yesterday, I announced Steve Young, Duke Energy's new Chief Financial Officer. Steve has recently served as the company's Controller and Chief Accounting Officer and previously served as the CFO of Duke Power. In his previous roles, Steve has worked closely with the utility commissions in North Carolina and South Carolina as well as the Federal Energy Regulatory Commission. He has deep understanding of our company and industry and will maintain a sharp focus on our financial objectives. Steve complements our special, deep and talented leadership team and I look forward to introducing Steve to many of you over the coming months. Now, let me turn to our discussion of the quarter's results, expectations for the remainder of 2013 and our near-term strategic priorities. July 2nd marks the one year anniversary of closing the Duke Progress merger. Thanks to the diligence and hard work of our employees and leadership teams, we have accomplished a great deal over the past 12 months. Slide 4 outlines our near-term priorities and our progress towards resolving them. Let me provide a brief update on these priorities. First, we continue to make progress…

(Operator Instructions) We will take our first question from Greg Gordon from ISI Group.

Thanks, good morning.

Good morning, Greg.

And congratulations.

Thank you.

I just want to go over the general guidance you have given for the balance of the year. Maybe review it. You said, you are still on track to meet your overall guidance expectation with the regulated utilities being better than forecast, international being slightly below and generation being uncertain, depending on the outcome of Ohio. Is that a fair recap?

No. I think the success of commercial, Greg, will depend on whether Ohio comes out but we also have the third quarter in front us for commercial and just seasonally, you can expect more earnings from the base operations in the third quarter.

Okay, but a big piece of the change in the utility, I am looking in the appendix which you referenced during your comments, page 22, is potential second half impact of the change in accounting for nuclear outage levelization. But it looks like one of the outage has already happened. So I presume that if that decision goes in your favor that that impact the retroactive?

So, Greg, if I could refer you to slide 7, I think you have got a comprehensive list of drivers to the second quarter. Let me just talk for a moment about nuclear outage levelization. For the Duke Energy Carolinas plant that accounting method will be adopted prospectively, so you will see the benefits in the fourth quarter of the outages in the Duke Carolinas fleet. The Duke Progress adoption of levelization was retroactive to January, so you see a couple of cents in Progress' results in the fourth quarter on levelization and you will see another $0.04 in the back half of the year for the Progress piece of levelization.

Perfect. That's exactly what I needed. Then prospectively if you think about our forecasting that means that there will be much less volatility in underlying O&M such that it actually will be sort of less of all things equal, less of a benefit in years where you have fewer outages?

Less of a detriment in the years that we have one.

Correct. Great.

So I think that stabilization is helpful. So yes, that's right. You got it.

But it won't change the cash flow, obviously the ongoing cash expense profile of the company in years where you have outages you will be booking those cash expenses?

That's right. The next rate case. We think that beyond 2015, rates will be set in the future based on levelized outage, so you will see cash impact at that point.

Got you. Thank you very much.

We will take our next question from Stephen Byrd from MSSB.

Good morning and congratulations. I just wanted to talk broadly, Lynn, you mentioned the third of the strategic priorities positioning the company for long-term success and the International business we have seen volatility in the performance of the business over time and as you think about the long-term vision for the company, how might we think about that volatility in the long-term? Ways to address that? To reduce that to be more in line with the U.S. core utility business?

Steve, I think that's a good question. There is natural volatility in international around foreign exchange rates and to some extent the National Methanol entity is impacted by oil prices or other commodity influences. That volatility as you know has been in our favor in recent years as the U.S. dollar has weakened, now the U.S. dollar is strengthening. It's going the other direction. We continue to look at ways to position the International business and address that volatility. I don't have any specific plan that I can share with you at this point, but positioning international to complement the growth of the company is the priority.

Understood. And, just on the overall O&M position of the company. You are obviously making great progress in looking at your cost structure. Should we be thinking about sort of continual review of that or, as you look out at the cost structure of the company, do you see further opportunities that are as yet untapped or areas that you would want to focus more on down the road, or is it more likely to be relatively stable from here?

Steve, I think, so staying on cost structure has become a way of life and we will continue to be such. You think about the merger integration plans that we developed, a lot of that work was in 2010 and early 2011. The business is continuing to change and we continue to look for ways to deploy continuous improvement, looks for ways to optimize labor and contract labor to continue to drive cost savings. I think you are hearing that throughout the industry as we grapple with a [loan] growth environment and we are very keenly focused on improving our cost structure.

We will take our next question from Shar Pourreza from Citigroup.

Good morning, everyone.

Good morning, Shar.

Just on Ohio, assuming you don't get the Ohio capacity to cost base approach that you are seeking, how soon could we see more defined plan on strategic options with the Ohio, the Midwest assets?

Shar, we are expecting an order probably late September or October. It could slip into November. We don't have a specific procedural schedule. We will take our time to analyze that order, understand what it says about the plants, understand what it says about the position the Commission is taking and then we will analyze and make a decision as it makes sense to do so. So I would say, I can't say it would be by the end of the year, necessarily, but I would think by the end of the first quarter of next year, we would have finalized our thinking.

Okay, got it. Very helpful. Then if you, looking at the second half this year, how much would the capacity case impact your 2H outlook, especially if you don't get an order until potentially late or mid fourth quarter?

I think that will depend on what the order says. So you may recall, when we filed the request, we actually asked for retroactive treatment back to August of 2012. So I think we are going to have to see how the Commission has referenced that and at what point the recovery is going at. So what I would point to is our plans for commercial is roughly $90 million of net income. We have delivered roughly $3 million through the second half. So that gives you a range of what the second half could include from a balanced target.

Alright, got it. Then just lastly, shifting to Florida, as far as the potential new addition of gas assets in 2017 and 2018, when could we start seeing builds occur, assuming you decide and you win the RFP process for 2017 power?

Let me ask Alex Glenn, who is the president of Florida, to jump in and give us an update on that.

Sure, Shar. On the 2018 combined cycle, our timing on that would be to go out for RFP this year and file an E case next year. So that we would get, if we select the self build option approval from the commission, and then that would be an in-service date before the summer peak of 2018. That's on the larger combined cycle on the 2014 to 2017 time frame timeframe. We are really looking at capacity needs in the '16 to '18 timeframe. So we could be looking at new capacity, whether it's purchase, build or acquiring existing facilities in that '14, '15, '16 timeframe.

Moving on, we will take our next question from Steven Fleishman with Wolfe Research.

Could you give us a sense of gone to ROEs that the utilities, either I guess trailing or in your forecast, for this year?

That's a good question. See, we have so many pending regulatories pertaining to rate case asset, that's an interesting time. Why don't we take that offline because I think what we want to do is to reflect the benefit of the rate cases over the partial year and probably give you a sense of what '13 could look like. We do file surveillance reports in North and South Carolina but both of those calculations have some unique characteristics to them that I don't think is really indicative of what we are earning. So I will ask Bill and Bob to follow-up with you on that.

Okay, great, and just to clarify your comment on rate cases, so after this round of cases is complete, you don't have any intention to file, did you say next year or for the next few years?

Next few years. The one case we are evaluating is Duke Energy Progress in South Carolina and that would be the only one.

Okay, and I think I have one more. Just where are you on any potential interest in the summer plant?

We are continuing to look at that, Steve. We have been in negotiations for sometime with Santee Cooper. As we have said before, we believe that regional nuclear, we think that we still believe diversification. We think that's going to be important to the company, long-term but we have not yet reached an agreement and don't have any further update at this point.

Moving on, we will take our next question from Julien Dumoulin-Smith from UBS.

Hi, good morning. Perhaps just a follow-up on Steve's question, what are the various considerations for timing on a South Carolina case as it goes?

Lloyd Yates is with me. I will ask Lloyd to step in on timing.

In terms of timing, we are looking at filing. If we file that case, we are looking at filing a case sometime late fourth quarter of this year.

Any considerations as far as whether or not you would? Anything need to happen or not happen, shall we say?

Julien, we analyze rate cases based on the returns that we are earnings based on what we see in terms of cost structure O&M, and also maintenance position and so Duke Energy Progress has the same capital as the North Carolina jurisdiction. So, it's Sutton and me and [complex] and so we are looking very closely at it. Just we have not made a final decision and therefore haven't notified the case and all the things that would go with that.

In terms of numbers, if you think about Duke Energy Progress South Carolina is about 20% being higher utility, Duke Energy North Carolina was 80%, Duke Energy South Carolina would be about 20% of utility, so think about it that way in terms of ours.

Great. Excellent. Then turning back to Ohio, if you will quickly? Some of your peers have talked about driving cost out of that business specifically given the transition to restructured markets. Any comments there? I mean, any kind of revaluation as you think about that business' future?

Julien, we have been focused on cost in the Midwest fleet really dating back to 2010 and that teams have been very aggressive in driving cost out. I think as you know where capacity prices are in this year in particular, you are not going to solve the economics by driving costs out in 2013, but we do have a very keen focus on running as efficiently as we can.

Very fair, and then perhaps lastly as it relates to Florida, if you could just walk through quickly, the interim capacity needs prior to 2018. Is it more likely to think of that as sort of a temporary need more than a permanent self-builds opportunity? I mean, how do you think about that just given this being more of a transitionary opportunity?

I will ask Alex to step in, Julien.

Yes, Julien. We look at it more of a permanent need. I mean, we are retiring roughly 1,700, 1,800 megawatts of capacity in the 2016 to 2018 timeframe. We have got real needs to fill capacity in 2016, 2017, 2018. That doesn't go away over the long-term, so we are looking at the 2016, 2017, 2018 as needs for additional generation whether it would be purchase power or peaking units or possibly upgrading some plants and then maybe possible acquisitions out there, plants that are existing in the market, so that's both, the short and the longer term need.

Great. So, in total, you are really looking at 3 gigs in aggregate of permanent needs, if you will, roughly?

Up to. I would say up to that.

Moving now to your next question from Michael Lapides from Goldman Sachs.

Guys, just first of all, Lynn and Steve, congratulations. Congratulations to both of you, especially Steve with your announcement this week. I want to focus a little bit on cash flow. I would love if you could just talk about things like significant items like pension contribution needs over the next year or so. How the potential change in cash that's outside of the U.S., how the change in that tax law could potentially impact Duke, whether you could bring back more cash from Latin America. as well as bonus depreciation?

Sure. I will take pension first, Michael. We are forecasting a $350 million contribution in 2013 which is comparable with what we did in 2012, and that will be a combination of the Duke Energy Progress plants as well as the plant. On the international front, we have got about $1.5 billion overseas. We have talked a little bit in the past about two things, one being a structured transaction that we could pursue to bring some cash home. That's still under evaluation. Then the second option would be flat out just repatriation. We could do it with or without a tax holiday, but you have got basically $1.5 billion offshore. Bonus depreciation, the bonus depreciation in 2013 is about $1.2 billion. We are in an NOL position. So the cash associated with that bonus is really going to be realized out in the 2015, 2016 timeframe.

Meaning, you are not expecting to be a significant cash tax payor in '13 or '14 as well?

That's correct.

Got it. One other question. When you closed the Progress Energy merger, there was a significant amount, almost $4 billion, of holding company debt at the Progress Energy level, at interest rates that are little bit above current first mortgage bond or senior secured debt. What are your plans for the Progress Energy holding company level debt and does that present a refinancing opportunity for you that can be a positive tailwind for earnings?

We have done a little bit of that, Michael. I believe we took the quick instrument out earlier this year and continue to work at the economics of refinancing to see if that makes sense but I would not say that's a huge driver.

Moving on, we will take our next question from Hugh Wynne from Sanford Bernstein.

Good morning, my questions have to do with a couple of the items that are excluded from adjusted earnings. The nuclear development charge of $87 million. I take it that's related to the cancellation of the EPC contract at Levy?

That's primarily Levy and also Harris. You may recall that we suspended most operating (inaudible) on the Harris plant and took a charge of wholesale allocation to the cost as well, Hugh.

Okay, but the Florida nuke costs, those are recoverable under the nuclear clause in that state. Is that right?

Let me pause just for a moment. So that's the wholesale allocation of Levy and under the wholesale terms of that contract, Hugh, we do not have an ability to recover them and as a result impair a bit of the cost. You may recall that these were identified back into 2012 settlement in Florida as being amortizable in the same way as COR but in connection with the 2013 settlement that provision of the 2012 settlement was set aside and we made a decision to take the impairment at that point. Hugh Wynne - Sanford C. Bernstein & Co.: Okay, and then, the litigation reserve of $50 million. I believe that's something actually with Crescent. I don't know if you could perhaps give us some background there?

It is, Hugh. We have a made a settlement offer to certain creditors that are involved in the Crescent bankruptcy litigation, really dating back to the Crescent transaction in 2007. The terms of the offer are confidential. The litigation is ongoing. At this point, I can't comment any further on that litigation. We of course, continue to believe that the claims are without merit but we are working through this litigation.

Great, and then finally if I could, could you just brief us on the post commissioning outages at Edwardsport and what, if anything, they pertain for the plant's capacity factor over the next year or year and half?

We have made good progress on Edwardsport, Hugh. The focus over the post and service period over the first few months is really consistent with early operations of a new power plant. We have been focused on system testing. We have been focused on tuning. So all of the major technology systems, the power block, the gasifier have been tested. The plant is running on both gasifiers as we speak. As we have identified issues, we have dispatched the team to do a root cause analysis and have resolved them. At this point, we do not see anything that has developed over a long-term nature. You can expect us to continue to address issues as they arise over the next several months as we really get plant to the point of full capacity and potential.

Moving on, we will take our next question from Kit Konolige from BGC Capital.

Thanks. I will add my congratulations to Lynn and Steve. A couple of questions, Lynn, I believe you spoke about sales growth being slightly disappointing compared with your expectations?

You know what I would say is we are 0.4% against an aspiration of 0.5%. We have seen good growth in industrial in certain segments, but weakness in others like I pointed to primary metals, probably the most weakness that concerns us a little bit about the back half is really in Florida, where we have continued to see static low usage customers and not really the rebound that we had hoped as we were forecasting the 0.5% and that's probably the area I would point to that gives us lack of complete confidence on a 0.5% growth rate. So, we will continue to update this in the third quarter and fourth quarter, but we just remain cautious about the outlook.

Is there anything that you see developing on the sales growth that would have implications for your 4% to 6% EPS growth over the next couple of years?

No. I think we have been very conservative with our growth assumptions, so, we are looking at kind of a 1% type range and we are adding customers at roughly that percentage right now, so I don't see a significant risk to the growth rate given the way we forecasted this volume.

And one other area, if I could you mentioned in positioning for long-term success one of your goals is to advocate for new regulatory mechanisms. Anything in particular you have in mind there?

I guess I would point back to something that we successfully partnered with other utilities in Indiana. The Senate Bill 560 that gives us an opportunity to modernize the grid. For example, under a multiyear plan to bring those costs into rates in a way that is more smoother for customers and more consistent with the deployment of capital. That would be anything if we could achieve things like that in our jurisdictions.

Moving on, we will take our next question from Kamal Patel from Wells Fargo.

Good morning. I had two quick questions roughly. With regard to Indiana, and the Edwardsport startup issues, is there any cost sharing requirement with repairs or will you be passing those costs to them? How does that work?

We are operating under cap in Indiana and the costs that we have incurred are under the cap, so we do not have positive risk in Indiana at this point.

Okay. Then is probably better answered offline, but the Florida settlement, I just wanted to get an idea of the various remaining balances that there might be for recovery related to Crystal River 3 and Levy, or is everything basically getting flushed out as part of the settlement?

After recognition of $295 million impairment, the remaining investment in Crystal River should be recoverable under the various provisions, so it would be about roughly $1.2 billion at the end of June on the Crystal River plant. Approximately $300 million on the upgrade environment. Then the Levy investment is probably around $250 million.

This is Alex. Right now it's around $200 million. That has not been collected.

That again would fall under cost recovery

Provisions of the settlement in the statute.

Okay. All right. That's it for me. Thank you.

We will take our final question from Michael Lapides from Goldman Sachs.

Hey, guys. (Inaudible).

Okay. Thanks, Michael. Okay. Well, thank you all for participating, for your questions. We are looking forward to visiting with many of you in the fall conference season. And, as always, the IR team is available if there are follow-up questions, so thank you so much.

Thank you. That will conclude today's conference. We thank you for participation.