Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy and Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. However, none of the registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.

DUKE ENERGY

Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the U.S. primarily through its subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of the Subsidiary Registrants, which along with Duke Energy are collectively referred to as the Duke Energy Registrants.

Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 2023, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2022.

Executive Overview

Advancing Our Clean Energy Transformation

During the six months ended June 30, 2023, we continued to execute on our clean energy transformation, delivering strong, sustainable value for shareholders, customers, communities and employees.

• In November 2022, the Duke Energy Board of Directors approved pursuing the sale of the Commercial Renewables business, excluding the offshore wind contract for Carolina Long Bay. We've entered into purchase and sale agreements with affiliates of Brookfield for the sale of the utility-scale solar and wind group in June 2023 and with affiliates of ArcLight for the distributed generation group in July 2023. Both transactions are expected to close by the end of 2023. See Note 2 to the Condensed Consolidated Financial Statements, "Dispositions," for additional information.

• Renewable energy remains a critical component of our generation mix and we've continued to actively expand the use of these assets across our service territories. In June 2023, we announced an agreement with Ranger Power for up to 199 MW of solar power in Indiana. Pending regulatory approval, energy generated from this facility will be sold to Duke Energy Indiana and serve the equivalent of roughly 35,000 homes. In July 2023, we announced a new utility-scale solar panel installation in Kentucky. Located on the rooftop of a facility owned by Amazon, the site complements our emerging solar portfolio in the state and demonstrates our commitment to furthering the clean energy goals of both the Company and our customers.

• In March 2023, we began operating the largest battery system in North Carolina, an 11-MW project in Onslow County, which will operate in conjunction with an adjacent 13-MW solar facility located on a leased site within Marine Corps Base (MCB) Camp Lejeune. Both projects are connected to a Duke Energy substation and will be used to serve all Duke Energy Progress customers. As part of an ongoing collaboration with the Department of Defense, further work could enable the solar and battery systems to improve the resiliency of MCB Camp Lejeune against outages.

• In March 2023, Duke Energy Florida announced two new solar projects as part of Clean Energy Connection, the company's community solar program. Once complete, each 74.9-MW solar facility will generate enough carbon-free electricity to power what would be the equivalent to around 23,000 homes. Additionally, in March 2023, Duke Energy Florida announced its first floating solar array pilot. The project will feature more than 1,800 floating solar modules and occupy approximately 2 acres of water surface on an existing cooling pond at the Duke Energy Hines Energy Complex in Bartow. The pilot is part of Duke Energy's Vision Florida program, which is designed to test innovative projects such as microgrids and battery energy storage, among others, to prepare the power grid for a clean energy future. We now operate 1,200 MW of solar in Florida, with plans to continue adding approximately 300 MW a year going forward.

• While transitioning to cleaner energy resources, affordability continues to be a focus for Duke Energy. Our cost reduction initiatives are grounded in our culture of safety and serving our customers with excellence, while maintaining our assets for the future. We’re leveraging digital innovation, data analytics, and process improvements to increase efficiency, making targeted capital investments to reduce maintenance costs, and reshaping our operations to streamline work and lower costs. Coming into 2023, we implemented a $300 million cost mitigation initiative to address interest rate and inflation headwinds. These cost reductions are primarily focused on corporate and support areas, and remain on track, but the earnings benefit of the cost reductions for the first half of 2023 has been more than offset by the impact of unseasonably mild weather.

Regulatory Activity. During the six months ended June 30, 2023, we continued to monitor developments while moving our regulatory strategy forward. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.

• In January 2023, Duke Energy Carolinas filed a rate case in North Carolina, and discovery is ongoing. This rate case incorporates elements of PBR and MYRP as allowed under HB 951. HB 951 provides the framework for many of the benefits of modernized regulatory constructs in North Carolina under the direction of the NCUC. Duke Energy Progress filed its first rate case utilizing these benefits, including both PBR and MYRP, in North Carolina in October 2022, and reached partial settlements on key matters in April and May 2023. We expect orders from the NCUC on the Duke Energy Progress rate case in the third quarter of this year and on the Duke Energy Carolinas rate case in the fourth quarter of this year.

• In February 2023, the PSCSC approved a constructive comprehensive settlement with all parties in the Duke Energy Progress South Carolina rate case. Duke Energy Progress implemented new customer rates effective April 1, 2023. We also made progress on our South Carolina storm securitization filings, completing our petition for a financing order with the PSCSC in May 2023.

MD&A			DUKE ENERGY

• In February 2023, the Indiana Court of Appeals issued an opinion finding certain coal ash related expenditures should be disallowed under a statute specific to federally mandated projects and also denied a petition for rehearing on the matter.

• In the Midwest, as it relates to our Duke Energy Ohio natural gas base rate case, we filed a stipulation on key matters with all parties except the OCC in April 2023.

Matters Impacting Future Results

The matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.

Regulatory Matters

Coal Ash Costs

Future spending of coal ash costs, including amounts recorded for depreciation and liability accretion, is expected to be recovered in future rate cases or rider filings. The majority of spend is expected to occur over the next 10 to 15 years.

Duke Energy Indiana has interpreted the Coal Combustion Residuals (CCR) rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. Interpretation of the requirements of the CCR rule is subject to further legal challenges and regulatory approvals, which could result in additional coal ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash. In January 2022, Duke Energy Indiana received a letter from the EPA regarding application and interpretation of the CCR rule for some of the ash basins at its Gallagher Station. In response to the letter, Duke Energy Indiana has submitted revised closure plans for those basins to the Indiana Department of Environmental Management (IDEM). Those closure plans are pending review by IDEM. For more information, see Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters."

Fuel Cost Recovery

As a result of rapidly rising commodity costs during 2022, including natural gas, fuel and purchased power prices in excess of amounts included in fuel-related revenues led to an increase in the under collection of fuel costs from customers in jurisdictions including Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida. These amounts have been deferred in regulatory assets and have impacted the cash flows of the registrants, including increased borrowings to temporarily finance related expenditures until recovery. Natural gas costs have stabilized in 2023 and the Duke Energy Registrants are making progress collecting deferred fuel balances. Regulatory filings have now been made for recovery of all remaining uncollected 2022 fuel costs. Across all jurisdictions, Duke Energy is currently on pace to recover $1.7 billion of deferred fuel costs in 2023, and expects deferred fuel balances to be back in line with historical norms by the end of 2024.

Commercial Renewables

In November 2022, Duke Energy committed to a plan to sell the Commercial Renewables Disposal Groups. The Commercial Renewables Disposal Groups were classified as held for sale and as discontinued operations in the fourth quarter of 2022. Duke Energy entered into purchase and sale agreements with affiliates of Brookfield in June 2023 for the sale of the utility-scale solar and wind group and with affiliates of ArcLight in July 2023 for the distributed generation group. Duke Energy expects to complete the disposition of all of the Commercial Renewables Disposal Groups by the end of 2023. If necessary, the impairments recorded for the disposal groups will be updated through the end of the disposal process, and any required adjustments could be material. Proceeds from the sales are expected to be used for debt avoidance. For more information, see Note 2 to the Condensed Consolidated Financial Statements, "Dispositions."

In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the ability for these solar and wind facilities to generate and sell electricity into the ERCOT market. Originally, Duke Energy (Parent) was named in multiple lawsuits arising out of this winter storm, but the plaintiffs have represented to the court that they will dismiss Duke Energy (Parent) from all cases. The legal actions related to project companies in this matter will transfer to affiliates of Brookfield. For more information, see Note 5 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies."

Supply Chain

In 2023, Duke Energy has experienced modest improvement in the stability of the markets for key materials purchased and used by the Company. The Company continues to monitor developments, including proposed federal regulations, that could disrupt or impact the Company's supply chain and, as a result, may impact Duke Energy's future financial results or the achievement of its clean energy goals.

Other

Duke Energy is monitoring general market conditions, including rising interest rates, and evaluating the impact to its results of operations, financial position and cash flows in the future.

Results of Operations

Non-GAAP Measures

Management’s Discussion and Analysis includes financial information prepared in accordance with GAAP in the U.S., as well as certain non-GAAP financial measures, adjusted earnings and adjusted EPS, discussed below. Non-GAAP financial measures are numerical measures of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.

MD&A			DUKE ENERGY

Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted EPS. Adjusted earnings and adjusted EPS represent income from continuing operations available to Duke Energy Corporation common stockholders in dollar and per share amounts, adjusted for the dollar and per share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. The most directly comparable GAAP measures for adjusted earnings and adjusted EPS are GAAP Reported Earnings (Loss) and GAAP Reported Earnings (Loss) Per Share, respectively.

Special items included in the periods presented below include the following, which management believes do not reflect ongoing costs:

• Regulatory Matters represents the net impact of charges related to the 2022 Indiana Supreme Court ruling on coal ash.

Discontinued operations includes the impairment on the sale of the Commercial Renewables business in the current year and results from Duke Energy's Commercial Renewables Disposal Groups.

Three Months Ended June 30, 2023, as compared to June 30, 2022

GAAP reported loss per share was $(0.32) for the second quarter of 2023 compared to GAAP reported earnings per share of $1.14 in the second quarter of 2022. In addition to the drivers below, GAAP reported EPS decreased primarily due to the impairment on the sale of the Commercial Renewables business.

As discussed above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s second quarter 2023 adjusted EPS was $0.91 compared to $1.09 for the second quarter of 2022. The decrease in adjusted EPS was primarily due to unfavorable weather, lower volumes and higher interest expense, partially offset by growth from riders and other margin, rate case impacts and lower operations and maintenance expense.

The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable GAAP measures.

			Three Months Ended June 30,
			2023												2022
(in millions, except per share amounts)			Earnings						EPS						Earnings						EPS
GAAP Reported (Loss) Earnings/GAAP Reported EPS			$	(234)					$	(0.32)					$	893					$	1.14
Adjustments:
Regulatory Matters(a)			—						—						(16)						(0.02)
Discontinued Operations(b)			948						1.23						(26)						(0.03)
Adjusted Earnings/Adjusted EPS			$	714					$	0.91					$	851					$	1.09

(a)Net of $2 million recorded within Noncontrolling Interests and $18 million tax benefit.

(b)Recorded in Loss from Discontinued Operations, net of tax, and Net Loss Attributable to Noncontrolling Interests.

Six Months Ended June 30, 2023, as compared to June 30, 2022

GAAP Reported EPS was $0.69 for the six months ended June 30, 2023, compared to $2.22 for the six months ended June 30, 2022. In addition to the drivers below, GAAP reported EPS decreased primarily due to the impairment on the sale of the Commercial Renewables business.

As discussed above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s adjusted EPS was $2.10 for the six months ended June 30, 2023, compared to $2.38 for the six months ended June 30, 2022. The decrease in adjusted EPS was primarily due to unfavorable weather, lower volumes and higher interest expense, partially offset by growth from riders and other margin, rate case impacts and lower operations and maintenance expense.

The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable GAAP measures.

			Six Months Ended June 30,
			2023												2022
(in millions, except per share amounts)			Earnings						EPS						Earnings						EPS
GAAP Reported Earnings/GAAP Reported EPS			$	531					$	0.69					$	1,711					$	2.22
Adjustments:
Regulatory Matters(a)			—						—						157						0.21
Discontinued Operations(b)			1,093						1.41						(38)						(0.05)
Adjusted Earnings/Adjusted EPS			$	1,624					$	2.10					$	1,830					$	2.38

(a)Net of $80 million tax benefit. $211 million recorded within Impairment of assets and other charges, $46 million within Regulated electric (Operating revenues) and $20 million within Noncontrolling Interests.

(b)Recorded in Loss from Discontinued Operations, net of tax, and Net Loss Attributable to Noncontrolling Interests.

MD&A			SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE

SEGMENT RESULTS

The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests and preferred stock dividends. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.

Duke Energy's segment structure includes the following segments: EU&I and GU&I. The remainder of Duke Energy’s operations is presented as Other. See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.

Electric Utilities and Infrastructure

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2023						2022						Variance						2023						2022						Variance
Operating Revenues			$	6,250					$	6,135					$	115					$	12,648					$	12,137					$	511
Operating Expenses
Fuel used in electric generation and purchased power			2,058						1,991						67						4,454						3,828						626
Operation, maintenance and other			1,341						1,328						13						2,610						2,754						(144)
Depreciation and amortization			1,188						1,110						78						2,284						2,241						43
Property and other taxes			337						331						6						685						668						17
Impairment of assets and other charges			5						(8)						13						12						206						(194)
Total operating expenses			4,929						4,752						177						10,045						9,697						348
Gains on Sales of Other Assets and Other, net			27						3						24						28						5						23
Operating Income			1,348						1,386						(38)						2,631						2,445						186
Other Income and Expenses, net			127						153						(26)						257						267						(10)
Interest Expense			444						391						53						896						767						129
Income Before Income Taxes			1,031						1,148						(117)						1,992						1,945						47
Income Tax Expense			158						158						—						307						241						66
Less: Income Attributable to Noncontrolling Interest			23						16						7						44						7						37
Segment Income			$	850					$	974					$	(124)					$	1,641					$	1,697					$	(56)
Duke Energy Carolinas GWh sales			20,638						22,022						(1,384)						41,557						44,571						(3,014)
Duke Energy Progress GWh sales			15,454						16,915						(1,461)						30,799						34,884						(4,085)
Duke Energy Florida GWh sales			11,400						12,340						(940)						20,390						22,242						(1,852)
Duke Energy Ohio GWh sales			5,695						5,564						131						11,338						11,561						(223)
Duke Energy Indiana GWh sales			6,927						7,644						(717)						14,277						15,594						(1,317)
Total Electric Utilities and Infrastructure GWh sales			60,114						64,485						(4,371)						118,361						128,852						(10,491)
Net proportional MW capacity in operation																					49,912						49,459						453

Three Months Ended June 30, 2023, as compared to June 30, 2022

EU&I’s lower segment income is due to higher depreciation related to higher plant in service and higher interest expense. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

• a $264 million increase in fuel revenues primarily due to higher fuel prices and cost recovery in the current year;

• a $114 million increase in storm revenues at Duke Energy Florida due to hurricanes Ian and Nicole collections;

• a $41 million increase in price due to 2022 Duke Energy Ohio Electric retail rate case and Ohio tax reform deferrals in prior year, higher pricing at Duke Energy Progress from the South Carolina retail rate case and interim rates from the North Carolina retail rate case, and base rate adjustments related to annual increases from the 2021 Settlement Agreement at Duke Energy Florida; and

• a $10 million increase due to the provision for rate refund recognized in the prior year related to the Indiana Supreme Court ruling on recovery of certain coal ash costs.

Partially offset by:

• a $163 million decrease in retail sales due to unfavorable weather compared to prior year;

• a $104 million decrease in wholesale revenues primarily due to lower capacity volumes at Duke Energy Progress and lower demand at Duke Energy Florida; and

• a $43 million decrease in weather-normal retail sales volumes.

MD&A			SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE

Operating Expenses. The variance was driven primarily by:

• a $78 million increase in depreciation and amortization primarily due to higher plant in service;

• a $67 million increase in fuel used in electric generation and purchased power due to higher fuel prices and higher amortizations of deferred fuel;

• a $13 million increase in impairment of assets and other charges primarily due to a prior year adjustment of the South Carolina Supreme Court decision on coal ash at Duke Energy Carolinas; and

• a $13 million increase in operation, maintenance and other primarily driven by higher storm amortization at Duke Energy Florida, partially offset by lower storm costs in the current year.

Gains on Sales of Other Assets and Other, net. The increase was primarily due to the sale of the Mint Street parking deck.

Other Income and Expenses, net. The decrease is primarily due to the wholesale portion of the Department of Energy settlement for nuclear fuel storage in prior year at Duke Energy Florida.

Interest Expense. The variance was primarily driven by higher interest rates and outstanding debt balances.

Income Tax Expense. Tax expense was unchanged primarily due to a decrease in pretax income, offset by a decrease in the amortization of excess deferred taxes. The ETRs for the three months ended June 30, 2023, and 2022, were 15.3% and 13.8%, respectively. The increase in the ETR was primarily due to a decrease in the amortization of excess deferred taxes.

Six Months Ended June 30, 2023, as compared to June 30, 2022

EU&I’s lower segment income is due to unfavorable weather, lower weather-normal retail sales volumes and higher interest expense, partially offset by the prior year Indiana Supreme Court ruling on recovery of certain coal ash costs and lower storm costs. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

• an $897 million increase in fuel revenues primarily due to higher fuel prices and cost recovery in the current year;

• a $114 million increase in storm revenues at Duke Energy Florida due to Hurricanes Ian and Nicole collections;

• a $78 million increase in price due to 2022 Duke Energy Ohio Electric retail rate case and Ohio tax reform deferrals in prior year, higher pricing at Duke Energy Progress from the South Carolina retail rate case and interim rates from the North Carolina retail rate case and base rate adjustments related to annual increases from the 2021 Settlement Agreement at Duke Energy Florida;

• a $47 million increase due to the provision for rate refund recognized in the prior year related to the Indiana Supreme Court ruling on recovery of certain coal ash costs; and

• a $42 million increase in rider revenues primarily due to a decrease in the return of EDIT to customers compared to the prior year at Duke Energy Carolinas and increased Storm Protection Plan rider revenue at Duke Energy Florida.

Partially offset by:

• a $354 million decrease in retail sales due to unfavorable weather compared to prior year;

• a $179 million decrease in wholesale revenues primarily due to lower capacity revenues at Duke Energy Progress and lower demand at Duke Energy Florida; and

• a $142 million decrease in weather-normal retail sales volumes.

Operating Expenses. The variance was driven primarily by:

• a $626 million increase in fuel used in electric generation and purchased power due to higher fuel prices and higher amortizations of deferred fuel;

• a $43 million increase in depreciation and amortization primarily due to higher plant in service, partially offset by the amortization of the Department of Energy settlement regulatory liability at Duke Energy Florida; and

• a $17 million increase in property and other taxes primarily due to higher property tax valuations at Duke Energy Florida and Duke Energy Carolinas, partially offset by favorable property tax true ups at Duke Energy Ohio and Duke Energy Indiana.

Partially offset by:

• a $194 million decrease in impairment of assets and other charges primarily due to the Indiana Supreme Court ruling on recovery of certain coal ash costs in the prior year, partially offset by a prior year adjustment of the South Carolina Supreme Court decision on coal ash at Duke Energy Carolinas; and

• a $144 million decrease in operation, maintenance and other primarily driven by lower storm costs in the current year.

Gains on Sales of Other Assets and Other, net. The increase was primarily due to the sale of the Mint Street parking deck.

MD&A			SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE

Other Income and Expenses, net. The decrease is primarily due to the wholesale portion of the Department of Energy settlement for nuclear fuel storage in prior year at Duke Energy Florida, partially offset by higher returns on deferred costs.

Interest Expense. The variance was primarily driven by higher interest rates and outstanding debt balances.

Income Tax Expense. The increase in tax expense was primarily due to a decrease in the amortization of excess deferred taxes. The ETRs for the six months ended June 30, 2023, and 2022, were 15.4% and 12.4%, respectively. The increase in the ETR was primarily due to a decrease in the amortization of excess deferred taxes.

Income Attributable to Noncontrolling Interest. The increase is due to the second and final tranche of the GIC minority interest sale.

Gas Utilities and Infrastructure

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2023						2022						Variance						2023						2022						Variance
Operating Revenues			$	359					$	453					$	(94)					$	1,270					$	1,485					$	(215)
Operating Expenses
Cost of natural gas			79						189						(110)						377						670						(293)
Operation, maintenance and other			110						113						(3)						229						295						(66)
Depreciation and amortization			84						82						2						169						161						8
Property and other taxes			30						33						(3)						61						74						(13)
Impairment of assets and other charges			(5)						—						(5)						(4)						—						(4)
Total operating expenses			298						417						(119)						832						1,200						(368)
(Losses) Gains on Sales of Other Assets and Other, net			(1)						4						(5)						(1)						4						(5)
Operating Income			60						40						20						437						289						148
Other Income and Expenses, Net			24						19						5						47						36						11
Interest Expense			52						42						10						102						82						20
Income Before Income Taxes			32						17						15						382						243						139
Income Tax Expense (Benefit)			7						(2)						9						70						(30)						100
Segment Income			$	25					$	19					$	6					$	312					$	273					$	39
Piedmont LDC throughput (dekatherms)			122,238,056						126,530,274						(4,292,218)						283,701,849						306,717,375						(23,015,526)
Duke Energy Midwest LDC throughput (Mcf)			13,908,430						16,571,611						(2,663,181)						45,910,155						53,817,683						(7,907,528)

Three Months Ended June 30, 2023, as compared to June 30, 2022

GU&I’s results were impacted primarily by margin growth, partially offset by higher interest expense. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

• a $110 million decrease due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs.

Partially offset by:

• a $12 million increase due to rider revenues related to Ohio CEP.

Operating Expenses. The variance was driven primarily by:

• a $110 million decrease in cost of natural gas due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs.

Interest Expense. The increase was primarily due to higher outstanding debt balances and interest rates.

Income Tax Expense (Benefit)****. The increase in tax expense was primarily due to an increase in pretax income and certain favorable tax credits recorded in the prior year. The ETRs for the three months ended June 30, 2023, and 2022, were 21.9% and (11.8)%, respectively. The increase in the ETR was primarily due to certain favorable tax credits recorded in the prior year.

Six Months Ended June 30, 2023, as compared to June 30, 2022

GU&I’s results were impacted primarily by margin growth. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

• a $293 million decrease due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs.

MD&A			SEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE

Partially offset by:

• a $23 million increase due to rider revenues related to Ohio CEP;

• a $15 million increase due to the MGP Settlement in prior year;

• a $15 million increase due to secondary marketing sales;

• a $9 million increase due to North Carolina IMR; and

• a $7 million increase due to customer growth.

Operating Expenses. The variance was driven primarily by:

• a $293 million decrease due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs;

• a $66 million decrease in operations, maintenance and other primarily due to the MGP Settlement in prior year; and

• a $13 million decrease in property and other taxes due to Ohio and Kentucky property tax true ups.

Interest Expense. The increase was primarily due to higher outstanding debt balances and interest rates.

Income Tax Expense (Benefit). The increase in tax expense was primarily due to a decrease in the amortization of excess deferred taxes related to the Ohio MGP Settlement recorded in the prior year and an increase in pretax income. The ETRs for the six months ended June 30, 2023, and 2022, were 18.3% and (12.3)%, respectively. The increase in the ETR was primarily due to a decrease in the amortization of excess deferred taxes related to the Ohio MGP Settlement recorded in the prior year.

Other

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2023						2022						Variance						2023						2022						Variance
Operating Revenues			$	34					$	31					$	3					$	65					$	61					$	4
Operating Expenses			20						12						8						49						42						7
Gains on Sales of Other Assets and Other, net			5						—						5						11						1						10
Operating Income			19						19						—						27						20						7
Other Income and Expenses, net			59						(6)						65						121						(11)						132
Interest Expense			271						166						105						527						324						203
Loss Before Income Taxes			(193)						(153)						(40)						(379)						(315)						(64)
Income Tax Benefit			(46)						(42)						(4)						(103)						(72)						(31)
Less: Income Attributable to Noncontrolling Interests			—						1						(1)						—						1						(1)
Less: Preferred Dividends			14						14						—						53						53						—
Net Loss			$	(161)					$	(126)					$	(35)					$	(329)					$	(297)					$	(32)

Three Months Ended June 30, 2023, as compared to June 30, 2022

The higher net loss was driven by higher interest expense, partially offset by higher return on investments.

Other Income and Expenses, net. The variance was primarily due to higher return on investments that fund certain employee benefit obligations and higher yields on captive insurance investments.

Interest Expense. The variance was primarily due to higher interest rates on long-term debt and commercial paper and higher outstanding long-term debt balances.

Income Tax Benefit. The increase in the tax benefit was primarily due to an increase in pretax losses and lower state tax benefits. The ETRs for the three months ended June 30, 2023, and 2022, were 23.8% and 27.5%, respectively. The decrease in the ETR was primarily due to lower state tax benefits.

Six Months Ended June 30, 2023, as compared to June 30, 2022

The higher net loss was driven by higher interest expense, partially offset by higher return on investments, lower loss experience related to captive insurance claims and an increase in the tax benefit.

Other Income and Expenses, net. The variance was primarily due to higher return on investments that fund certain employee benefit obligations and higher yields on captive insurance investments.

Interest Expense. The variance was primarily due to higher interest rates on long-term debt and commercial paper and higher outstanding long-term debt balances.

MD&A			SEGMENT RESULTS - OTHER

Income Tax Benefit. The increase in the tax benefit was primarily due to an increase in pretax losses and favorable tax impacts related to higher investment returns on certain employee benefit obligations. The ETRs for the six months ended June 30, 2023, and 2022, were 27.2% and 22.9%, respectively. The increase in the ETR was primarily due to favorable tax impacts related to higher investment returns on certain employee benefit obligations.

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2023						2022						Variance						2023						2022						Variance
Loss From Discontinued Operations, net of tax			$	(955)					$	(18)					$	(937)					$	(1,164)					$	(33)					$	(1,131)

Three Months Ended June 30, 2023, as compared to June 30, 2022

The variance was primarily driven by the impairment on the sale of the Commercial Renewables business recorded in 2023.

Six Months Ended June 30, 2023, as compared to June 30, 2022

The variance was primarily driven by the impairment on the sale of the Commercial Renewables business recorded in 2023.

DUKE ENERGY CAROLINAS

Results of Operations

			Six Months Ended June 30,
(in millions)			2023						2022						Variance
Operating Revenues			$	3,762					$	3,669					$	93
Operating Expenses
Fuel used in electric generation and purchased power			1,133						879						254
Operation, maintenance and other			861						974						(113)
Depreciation and amortization			779						763						16
Property and other taxes			186						170						16
Impairment of assets and other charges			6						(9)						15
Total operating expenses			2,965						2,777						188
Gains on Sales of Other Assets and Other, net			26						—						26
Operating Income			823						892						(69)
Other Income and Expenses, net			118						113						5
Interest Expense			332						284						48
Income Before Income Taxes			609						721						(112)
Income Tax Expense			67						53						14
Net Income			$	542					$	668					$	(126)

The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.

Increase (Decrease) over prior year			2023
Residential sales			(5.9)		%
General service sales			(1.1)		%
Industrial sales			(5.5)		%
Wholesale power sales			4.3		%
Joint dispatch sales			56.0		%
Total sales			(6.8)		%
Average number of customers			1.7		%

Six Months Ended June 30, 2023, as compared to June 30, 2022

Operating Revenues. The variance was driven primarily by:

• a $268 million increase in fuel revenues due to higher fuel prices; and

• a $39 million increase in rider revenues primarily due to a decrease in the return of EDIT to customers compared to the prior year and increases in competitive procurement of renewable energy program riders, partially offset by decreases in energy efficiency.

MD&A			DUKE ENERGY CAROLINAS

Partially offset by:

• a $164 million decrease in retail sales due to unfavorable weather compared to prior year; and

• a $63 million decrease in weather-normal retail sales volumes.

Operating Expenses**.** The variance was driven primarily by:

• a $254 million increase in fuel used in electric generation and purchased power primarily due to changes in the generation mix, partially offset by the recovery of fuel expenses and lower Joint Dispatch Agreement (JDA) purchased volumes and prices;

• a $16 million increase in depreciation and amortization primarily due to a higher depreciable base, partially offset by decrease in depreciation and amortization primarily due to the prior year South Carolina Supreme Court decision on coal ash and an increase in Grid Improvement Plan deferrals; and

• a $15 million increase in impairment of assets and other primarily due to a prior year adjustment of the South Carolina Supreme Court decision on coal ash.

Partially offset by:

• a $113 million decrease in operation, maintenance and other expense primarily due to lower storm restoration costs and a decrease in spend on outside services.

Gains on Sales of Other Assets and Other, net. The increase was primarily due to the sale of the Mint Street parking deck.

Interest Expense. The variance was driven by higher interest rates and outstanding debt balances.

Income Tax Expense. The increase in tax expense was primarily due to a decrease in the amortization of excess deferred taxes, partially offset by a decrease in pretax income.

PROGRESS ENERGY

Results of Operations

			Six Months Ended June 30,
(in millions)			2023						2022						Variance
Operating Revenues			$	6,260					$	6,206					$	54
Operating Expenses
Fuel used in electric generation and purchased power			2,367						2,322						45
Operation, maintenance and other			1,252						1,248						4
Depreciation and amortization			1,046						1,045						1
Property and other taxes			341						303						38
Impairment of assets and other charges			5						4						1
Total operating expenses			5,011						4,922						89
Gains on Sales of Other Assets and Other, net			12						3						9
Operating Income			1,261						1,287						(26)
Other Income and Expenses, net			97						105						(8)
Interest Expense			465						419						46
Income Before Income Taxes			893						973						(80)
Income Tax Expense			149						160						(11)
Net Income			$	744					$	813					$	(69)

Six Months Ended June 30, 2023, as compared to June 30, 2022

Operating Revenues. The variance was driven primarily by:

• a $198 million increase in fuel cost recovery at Duke Energy Florida driven by higher fuel rates in the current year, partially offset by a decrease at Duke Energy Progress driven by lower JDA sales volumes at lower prices;

• a $114 million increase in storm revenues at Duke Energy Florida due to hurricanes Ian and Nicole collections;

• a $33 million increase in rider revenues at Duke Energy Florida primarily due to increased Storm Protection Plan rider revenue; and

• a $25 million increase due to higher pricing related to rate cases at Duke Energy Progress from the South Carolina retail rate case and interim rates from the North Carolina retail rate case, and base rate adjustments related to annual increases from the 2021 Settlement Agreement at Duke Energy Florida.

MD&A			PROGRESS ENERGY

Partially offset by:

• a $142 million decrease in wholesale revenues, net of fuel, due to lower capacity volumes at Duke Energy Progress and lower demand at Duke Energy Florida.

• a $117 million decrease in retail sales due to unfavorable weather compared to prior year; and

• a $67 million decrease in weather-normal retail sales volumes.

Operating Expenses. The variance was driven primarily by:

• a $45 million increase in fuel used in electric generation and purchased power primarily due to higher amortization of deferred fuel balances at Duke Energy Florida, partially offset by lower volumes at Duke Energy Progress; and

• a $38 million increase in property and other taxes primarily due to higher property tax valuation adjustments at Duke Energy Florida.

Interest Expense. The variance was driven primarily by higher outstanding debt balances and interest rates at Duke Energy Florida and Duke Energy Progress.

Income Tax Expense. The decrease in tax expense was primarily due to a decrease in pretax income and an increase in production tax credits, partially offset by a decreased in the amortization of excess deferred taxes.

DUKE ENERGY PROGRESS

Results of Operations

			Six Months Ended June 30,
(in millions)			2023						2022						Variance
Operating Revenues			$	2,958					$	3,213					$	(255)
Operating Expenses
Fuel used in electric generation and purchased power			1,034						1,167						(133)
Operation, maintenance and other			706						751						(45)
Depreciation and amortization			611						577						34
Property and other taxes			95						90						5
Impairment of assets and other charges			7						4						3
Total operating expenses			2,453						2,589						(136)
Gains on Sales of Other Assets and Other, net			1						1						—
Operating Income			506						625						(119)
Other Income and Expenses, net			61						54						7
Interest Expense			206						175						31
Income Before Income Taxes			361						504						(143)
Income Tax Expense			52						70						(18)
Net Income			$	309					$	434					$	(125)

The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.

Increase (Decrease) over prior period			2023
Residential sales			(8.0)		%
General service sales			(7.6)		%
Industrial sales			(15.3)		%
Wholesale power sales			(8.6)		%
Joint dispatch sales			(24.0)		%
Total sales			(11.7)		%
Average number of customers			1.6		%

Six Months Ended June 30, 2023, as compared to June 30, 2022

Operating Revenues. The variance was driven primarily by:

• a $117 million decrease in retail sales due to unfavorable weather compared to prior year;

• a $90 million decrease in fuel revenues due to lower JDA sales volumes at lower prices in the current year, partially offset by higher retail fuel prices;

• a $37 million decrease in wholesale revenues, net of fuel, due to lower capacity volumes; and

• a $34 million decrease in weather-normal retail sales volumes.

MD&A			DUKE ENERGY PROGRESS

Partially offset by:

• a $17 million increase due to higher pricing from the South Carolina retail rate case and interim rates from the North Carolina retail rate case.

Operating Expenses. The variance was driven primarily by:

• a $133 million decrease in fuel used in electric generation and purchased power primarily due to lower volumes, partially offset by the recovery of fuel expenses; and

• a $45 million decrease in operation, maintenance and other expense primarily due to lower storm costs.

Partially offset by:

• a $34 million increase in depreciation and amortization due to higher depreciable base.

Interest Expense. The variance was driven primarily by higher outstanding debt balances and interest rates.

Income Tax Expense. The decrease in tax expense was primarily due to a decrease in pretax income, partially offset by a decrease in the amortization of excess deferred taxes.

DUKE ENERGY FLORIDA

Results of Operations

			Six Months Ended June 30,
(in millions)			2023						2022						Variance
Operating Revenues			$	3,292					$	2,983					$	309
Operating Expenses
Fuel used in electric generation and purchased power			1,333						1,155						178
Operation, maintenance and other			537						490						47
Depreciation and amortization			435						468						(33)
Property and other taxes			246						212						34
Impairment of assets and other charges			(1)						—						(1)
Total operating expenses			2,550						2,325						225
Gains on Sales of Other Assets and Other, net			1						2						(1)
Operating Income			743						660						83
Other Income and Expenses, net			37						55						(18)
Interest Expense			202						174						28
Income Before Income Taxes			578						541						37
Income Tax Expense			115						109						6
Net Income			$	463					$	432					$	31

The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Wholesale power sales include both billed and unbilled sales. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.

Increase (Decrease) over prior period			2023
Residential sales			(0.4)		%
General service sales			0.9		%
Industrial sales			(4.4)		%
Wholesale and other			(50.0)		%
Total sales			(8.3)		%
Average number of customers			1.6		%

Six Months Ended June 30, 2023, as compared to June 30, 2022

Operating Revenues. The variance was driven primarily by:

• a $288 million increase in fuel and capacity revenues primarily due to an increase in fuel and capacity rates billed to retail customers;

• a $114 million increase in storm revenues due to hurricanes Ian and Nicole collections;

• a $33 million increase in rider revenues primarily due to increased rate of Storm Protection Plan rider; and

• an $8 million increase in retail pricing due to base rate adjustments related to annual increases from the 2021 Settlement Agreement.

MD&A			DUKE ENERGY FLORIDA

Partially offset by:

• a $105 million decrease in wholesale power revenues, net of fuel, primarily due to decreased demand; and

• a $33 million decrease in weather-normal retail sales volumes.

Operating Expenses. The variance was driven primarily by:

• a $178 million increase in fuel used in electric generation and purchased power primarily due to higher amortization of deferred fuel and capacity expense;

• a $47 million increase in operation, maintenance and other primarily due to storm amortization; and

• a $34 million increase in property and other taxes primarily due to property tax valuation adjustments.

Partially offset by:

• a $33 million decrease in depreciation and amortization primarily due to the amortization of Department of Energy settlement regulatory liability.

Other Income and Expenses, net. The decrease is primarily due to the wholesale portion of the Department of Energy settlement for nuclear fuel storage in prior year.

Interest Expense. The increase was primarily due to higher interest rates and outstanding debt balances.

Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income and a decrease in the amortization of excess deferred taxes, partially offset by an increase in production tax credits.

DUKE ENERGY OHIO

Results of Operations

			Six Months Ended June 30,
(in millions)			2023						2022						Variance
Operating Revenues
Regulated electric			$	939					$	813					$	126
Regulated natural gas			359						370						(11)
Total operating revenues			1,298						1,183						115
Operating Expenses
Fuel used in electric generation and purchased power			340						254						86
Cost of natural gas			112						153						(41)
Operation, maintenance and other			244						287						(43)
Depreciation and amortization			176						163						13
Property and other taxes			164						193						(29)
Total operating expenses			1,036						1,050						(14)
Gains on Sales of Other Assets and Other, net			—						1						(1)
Operating Income			262						134						128
Other Income and Expenses, net			21						12						9
Interest Expense			79						60						19
Income Before Income Taxes			204						86						118
Income Tax Expense (Benefit)			33						(47)						80
Net Income			$	171					$	133					$	38

The following table shows the percent changes in GWh sales of electricity, dekatherms of natural gas delivered and average number of electric and natural gas customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.

			Electric			Natural Gas
Increase (Decrease) over prior year			2023			2023
Residential sales			(5.6)		%	(14.3)		%
General service sales			10.0		%	(27.7)		%
Industrial sales			19.0		%	(0.3)		%
Wholesale electric power sales			(53.0)		%	n/a
Other natural gas sales			n/a			(2.1)		%
Total sales			(1.9)		%	(14.7)		%
Average number of customers			1.1		%	0.6		%

MD&A			DUKE ENERGY OHIO

Six Months Ended June 30, 2023, as compared to June 30, 2022

Operating Revenues. The variance was driven primarily by:

• a $95 million increase in fuel-related revenues primarily due to higher retail sales volumes and higher fuel rates in the current year;

• a $60 million increase in price due to the 2022 Duke Energy Ohio Electric retail rate case and Ohio tax reform deferrals in prior year; and

• a $15 million increase due to the MGP Settlement in the prior year.

Partially offset by:

• a $38 million decrease in revenues related to lower Ohio Valley Electric Corporation (OVEC) rider collections and OVEC sales into PJM Interconnection, LLC (PJM);

• a $25 million decrease due to unfavorable weather compared to prior year; and

• a $7 million decrease in retail revenue riders primarily due to the decrease in Distribution Capital Investment Rider (DCI), partially offset by increases in the Ohio CEP rider and Distribution Decoupling Rider (DDR).

Operating Expenses. The variance was driven primarily by:

• a $43 million decrease in operation, maintenance and other expense primarily due to the MGP Settlement in the prior year; and

• a $29 million decrease in property and other taxes primarily due to property tax true ups in Ohio and Kentucky, partially offset by higher franchise taxes.

Partially offset by:

• a $45 million increase in fuel expense primarily driven by an increase in purchased power volumes, partially offset by lower retail prices for natural gas and purchased power; and

• a $13 million increase in depreciation and amortization primarily driven by an increase in distribution plant in service and depreciation rates resulting from the 2022 Duke Energy Ohio Electric retail rate case implemented in 2023.

Interest Expense. The increase was primarily due to higher outstanding debt balances and interest rates.

Income Tax Expense (Benefit). The increase in tax expense was primarily due to a decrease in the amortization of excess deferred taxes related to the MGP Settlement recorded in the prior year and an increase in pretax income.

DUKE ENERGY INDIANA

Results of Operations

			Six Months Ended June 30,
(in millions)			2023						2022						Variance
Operating Revenues			$	1,755					$	1,740					$	15
Operating Expenses
Fuel used in electric generation and purchased power			697						678						19
Operation, maintenance and other			364						374						(10)
Depreciation and amortization			327						311						16
Property and other taxes			25						47						(22)
Impairment of assets and other charges			—						211						(211)
Total operating expenses			1,413						1,621						(208)
Operating Income			342						119						223
Other Income and Expenses, net			28						18						10
Interest Expense			104						90						14
Income Before Income Taxes			266						47						219
Income Tax Expense (Benefit)			46						(23)						69
Net Income			$	220					$	70					$	150

MD&A			DUKE ENERGY INDIANA

The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.

Increase (Decrease) over prior year			2023
Residential sales			(8.5)		%
General service sales			(2.3)		%
Industrial sales			15.1		%
Wholesale power sales			(18.5)		%
Total sales			(8.4)		%
Average number of customers			1.1		%

Six Months Ended June 30, 2023, as compared to June 30, 2022

Operating Revenues. The variance was driven primarily by:

• a $76 million increase in retail fuel revenues primarily due to higher fuel cost recovery driven by higher fuel prices; and

• a $47 million increase primarily due to the provision for rate refund recognized in the prior year related to the Indiana Supreme Court ruling on recovery of certain coal ash costs.

Partially offset by:

• a $37 million decrease primarily due to wholesale revenues, including fuel revenues, driven by lower rates and the bulk power marketing sharing provision;

• a $34 million decrease in retail sales due to unfavorable weather;

• a $25 million decrease in weather-normal retail sales volumes primarily due to lower residential and nonresidential customer demand; and

• a $12 million decrease primarily due to the utility receipts tax repeal.

Operating Expenses. The variance was driven primarily by:

• a $211 million decrease in impairment of assets and other charges primarily due to the Indiana Supreme Court ruling on recovery of certain coal ash costs in the prior year;

• a $22 million decrease in property and other taxes primarily due to franchise taxes and property tax true ups for prior periods; and

• a $10 million decrease in operation, maintenance and other primarily due to lower storm contingency costs.

Partially offset by:

• a $19 million increase in fuel used in electric generation and purchased power primarily due to higher deferred fuel amortization, partially offset by lower purchased power expense, natural gas and coal costs; and

• a $16 million increase in depreciation and amortization primarily due to higher depreciable base.

Other Income and Expenses, net. The variance is primarily due to intercompany interest income.

Interest Expense. The variance is primarily due to higher outstanding debt balances and interest rates.

Income Tax Expense (Benefit). The increase in tax expense was primarily due to an increase in pretax income and a decrease in the amortization of excess deferred income taxes related to the coal ash impairment recorded in the prior year.

MD&A			PIEDMONT

PIEDMONT

Results of Operations

			Six Months Ended June 30,
(in millions)			2023						2022						Variance
Operating Revenues			$	911					$	1,115					$	(204)
Operating Expenses
Cost of natural gas			265						517						(252)
Operation, maintenance and other			171						183						(12)
Depreciation and amortization			116						110						6
Property and other taxes			30						31						(1)
Impairment of assets and other charges			(4)						—						(4)
Total operating expenses			578						841						(263)
Gains on Sales of Other Assets and Other, net			—						4						(4)
Operating Income			333						278						55
Other Income and Expenses, net			32						28						4
Interest Expense			79						66						13
Income Before Income Taxes			286						240						46
Income Tax Expense			51						27						24
Net Income			$	235					$	213					$	22

The following table shows the percent changes in dekatherms delivered and average number of customers. The percentages for all throughput deliveries represent billed and unbilled sales. Amounts are not weather-normalized.

Increase (Decrease) over prior year			2023
Residential deliveries			(18.5)		%
Commercial deliveries			(13.6)		%
Industrial deliveries			(2.6)		%
Power generation deliveries			(5.6)		%
For resale			(20.9)		%
Total throughput deliveries			(7.5)		%
Secondary market volumes			(27.1)		%
Average number of customers			1.5		%

The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The weather normalization adjustment mechanisms mostly offset the impact of weather on bills rendered, but do not ensure full recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.

Six Months Ended June 30, 2023, as compared to June 30, 2022

Operating Revenues. The variance was driven primarily by:

• a $252 million decrease due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs;

Partially offset by:

• a $15 million increase due to secondary marketing sales;

• a $9 million increase due to North Carolina IMR; and

• a $7 million increase due to customer growth.

Operating Expenses. The variance was driven primarily by:

• a $252 million decrease in cost of natural gas due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs; and

• a $12 million decrease in operations, maintenance and other primarily due to lower employee compensation and benefits related costs, and lower information technology costs.

Interest Expense. The increase was primarily due to higher outstanding debt balances and interest rates.

Income Tax Expense**.** The increase in tax expense was primarily due to an increase in pretax income and a decrease in the amortization of excess deferred taxes.

MD&A			LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. Additionally, due to its existing tax attributes and projected tax credits to be generated relating to the IRA, Duke Energy does not expect to be a significant federal cash taxpayer until around 2030. Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2022, included a summary and detailed discussion of projected primary sources and uses of cash for 2023 to 2025.

As of June 30, 2023, Duke Energy had $377 million of cash on hand and $5.7 billion available under its $9 billion Master Credit Facility. Duke Energy expects to have sufficient liquidity in the form of cash on hand, cash from operations and available credit capacity to support its funding needs. Refer to Note 6 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for information regarding Duke Energy's debt issuances and maturities, and available credit facilities including the Master Credit Facility. Additionally, see Note 2 to the Condensed Consolidated Financial Statements, "Dispositions," for expected timing of proceeds from the sale of certain Commercial Renewables assets to affiliates of Brookfield and ArcLight.

In April 2023, Moody’s Investors Service, Inc. (Moody's) maintained the credit ratings and affirmed the ratings outlook for all of the Duke Energy Registrants, including Duke Energy Ohio. Operations in Kentucky are conducted through Duke Energy Ohio's wholly owned subsidiary, Duke Energy Kentucky. Moody's lowered Duke Energy Kentucky's ratings outlook from stable to negative while maintaining Duke Energy Kentucky's credit rating of Baa1 for senior unsecured debt.

Cash Flow Information

The following table summarizes Duke Energy’s cash flows.

						Six Months Ended
						June 30,
(in millions)						2023						2022
Cash flows provided by (used in):
Operating activities						$	3,785					$	4,035
Investing activities						(6,508)						(5,492)
Financing activities						2,687						1,576
Net (decrease) increase in cash, cash equivalents and restricted cash						(36)						119
Cash, cash equivalents and restricted cash at beginning of period						603						520
Cash, cash equivalents and restricted cash at end of period						$	567					$	639

OPERATING CASH FLOWS

The following table summarizes key components of Duke Energy’s operating cash flows.

						Six Months Ended
						June 30,
(in millions)						2023						2022						Variance
Net income						$	557					$	1,700					$	(1,143)
Non-cash adjustments to net income						4,085						2,961						1,124
Payments for asset retirement obligations						(261)						(255)						(6)
Working capital						(1,286)						(527)						(759)
Other assets and Other liabilities						690						156						534
Net cash provided by operating activities						$	3,785					$	4,035					$	(250)

The variance is primarily due to the timing of accruals and payments in working capital accounts, partially offset by the recovery of deferred fuel costs.

MD&A			LIQUIDITY AND CAPITAL RESOURCES

INVESTING CASH FLOWS

The following table summarizes key components of Duke Energy’s investing cash flows.

						Six Months Ended
						June 30,
(in millions)						2023						2022						Variance
Capital, investment and acquisition expenditures						$	(6,287)					$	(5,149)					$	(1,138)
Other investing items						(221)						(343)						122
Net cash used in investing activities						$	(6,508)					$	(5,492)					$	(1,016)

The variance is primarily due to higher overall investments in the EU&I segment.

FINANCING CASH FLOWS

The following table summarizes key components of Duke Energy’s financing cash flows.

						Six Months Ended
						June 30,
(in millions)						2023						2022						Variance
Issuances of long-term debt, net						$	4,722					$	2,567					$	2,155
Notes payable, commercial paper and other short-term borrowings						(582)						558						(1,140)
Dividends paid						(1,606)						(1,574)						(32)
Contributions from noncontrolling interests						248						126						122
Other financing items						(95)						(101)						6
Net cash provided by financing activities						$	2,687					$	1,576					$	1,111

The variance was primarily due to:

• a $2,155 million increase in net proceeds from issuances of long-term debt, primarily due to timing of issuances and redemptions of long-term debt; and

• a $122 million increase in contributions from noncontrolling interests.

Partially offset by:

• a $1,140 million decrease in net borrowings from notes payable and commercial paper.

OTHER MATTERS

Environmental Regulations

The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, coal ash and other environmental matters. These regulations can be changed from time to time and result in new obligations of the Duke Energy Registrants. Refer to Note 4, "Regulatory Matters," in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2022, for more information regarding potential plant retirements and Note 4, "Regulatory Matters," to the Condensed Consolidated Financial Statements, for further information regarding regulatory filings related to the Duke Energy Registrants.

On May 18, 2023, the EPA published in the Federal Register a proposed rule under the Resource Conservation and Recovery Act, which would establish regulatory requirements for inactive surface impoundments at inactive generating facilities (Legacy CCR Surface Impoundments) and establish groundwater monitoring, corrective action, closure and post-closure care requirements for all CCR management units at facilities otherwise subject to the CCR rule. Duke Energy is reviewing the proposed rule and analyzing the potential impacts it could have on the Company, which could be material.

On May 23, 2023, the EPA published in the Federal Register proposed new source performance standards under Clean Air Act (CAA) section 111(b) that would establish standards of performance for emissions of carbon dioxide for newly constructed, modified, and reconstructed fossil fuel-fired electric utility steam generating units and fossil fuel-fired stationary combustion turbines. On that same day, in a separate rulemaking under CAA section 111(d), the EPA published proposed emission guidelines for states to use in developing plans to limit carbon dioxide emissions from existing fossil fuel-fired electric generating units and certain large existing stationary combustion turbines. Duke Energy is reviewing the proposed rules and analyzing the potential impacts they could have on the Company, which could be material.