UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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PIEDMONT NATURAL GAS COMPANY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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The following is a transcript of the Duke Energy Corporation and Piedmont Natural Gas Company, Inc. webcast and conference
call on October 26, 2015 at 8:30 a.m. ET.
C O R P O R A T E P A R T I C I P A N
T S
Bill Currens Duke Energy Corporation - IR
Lynn Good Duke Energy Corporation - President & CEO
Tom Skains Piedmont Natural Gas - Chairman, President & CEO
Steve Young Duke Energy Corporation - EVP & CFO
C O N F E R E N C E C A L L P A R T
I C I P A N T S
Dan Eggers Credit Suisse - Analyst
Shar Pourreza Guggenheim Partners - Analyst
Chris Turnure JPMorganChase - Analyst
Julien Dumoulin-Smith UBS - Analyst
Ali Agha SunTrust Robinson Humphrey - Analyst
Maura Shaughnessy MFS - Analyst
Jim
Von Riesemann Mizuho Securities - Analyst
Paul Ridzon KeyBanc Capital Markets - Analyst
Paul Patterson Glenrock Associates - Analyst
P R E S E N T A T I O N
Operator
(audio in progress) presentation. (Operator Instructions). It is now my pleasure to introduce your host, Bill Currens, Vice President, Investor Relations
for Duke Energy. Please begin.
Bill Currens - Duke Energy Corporation - IR
Thank you, Joe. Good morning, everyone, and thank you for joining us on such short notice today. Earlier this morning, Duke Energy and Piedmont Natural
Gas announced the Boards of Directors of both companies have unanimously approved and the companies have entered into a definitive agreement whereby Duke Energy will acquire Piedmont in an all-cash transaction for $60 per share or $4.9 billion. This
reflects an enterprise value of approximately $6.7 billion, including net debt assumed of approximately $1.8 billion. Assuming receipt of all required approvals, the companies are targeting to close the transaction by the end of 2016. Until the
transaction has closed, the companies will continue to operate as separate entities.
Todays discussion will include forward-looking
information and the use of non-GAAP financial measures. Slides 2 through 4 present the Safe Harbor statement, which accompanies our presentation materials. A reconciliation of non-GAAP financial measures can be found on our website at
Duke-Energy.com and at PiedmontNG.com, as well as in todays materials. Please note that both companies have supplemental disclosures on their respective websites that can be used in your analysis of the transaction.
I am joined by Lynn Good, President and CEO of Duke Energy, along with Steve Young, Executive Vice President and Chief Financial Officer. Additionally,
Piedmont Natural Gas Chairman, President and CEO, Tom Skains, is with us on the call today.
As summarized on slide 5, Lynn will begin with an overview of the transactions key terms and
strategic rationale. Then Tom will provide an overview of the rationale for Piedmont. Then Steve will close with a summary of the key financial highlights, including financing assumptions, as well as closing milestones and expected timeline. With
that, Ill turn the call over to Lynn.
Lynn Good - Duke Energy Corporation - President & CEO
So good morning, everyone. Im very excited to be with you this morning to discuss our announced acquisition of Piedmont Natural Gas, which
continues our transformation to a highly regulated utility business mix, and increases our presence in natural gas infrastructure. Piedmont is one of the premier gas LDC businesses in the US supported by attractive regulatory jurisdictions, superior
customer service and strong growth prospects. We have known and partnered with the Piedmont team over many years and have a great deal of respect for their management team, their employees and their business.
Let me provide an overview of the transaction as outlined on slide 6. The $4.9 billion all-cash purchase price represents an approximate 40% premium to
Piedmonts closing stock price this past Friday. We believe this premium is in line with recent transactions and is justified by the underlying strength of and inherent future growth prospects in the Piedmont business, as well as the strategic
benefits of the transaction to Duke Energy.
Upon closing, an existing member of Piedmonts senior management team will manage a new natural gas
operations segment, including the LDC utilities and gas infrastructure investments reporting directly to me. The Carolinas and Tennessee gas LDC operations will continue to be run under the Piedmont brand and the operations team will be based at
Piedmonts current headquarters in Charlotte. Under terms of the merger agreement, upon closing, we will also add one Piedmont Board member to the existing Duke Energy Board. We are targeting to close the transaction by the end of 2016 after
receipt of all required approvals.
Let me begin with a brief overview of Piedmont as outlined on slide 7. Similar to Duke, Piedmont has a long and
well-established history of doing business in the Carolinas, starting operations in 1951. Piedmonts businesses include regulated natural gas local distribution companies serving a combined 1 million customers in North Carolina, South
Carolina and Tennessee. 90% of Piedmonts LDC customers are residential with the remainder mostly in the commercial class. This transaction will triple the scope of our existing natural gas LDC operations, which currently serve approximately
500,000 customers in the Southwestern Ohio and Northern Kentucky regions. After the transaction closes, Duke Energy will serve around 7.3 million electric customers and 1.5 million natural gas LDC customers.
Piedmont also has ownership interest in various gas infrastructure businesses, including inter and intrastate natural gas transportation, an underground
storage facility and an LNG storage facility. These interests include a 10% ownership interest in the Atlantic Coast Pipeline, which we are also involved with. Additionally, Piedmont has a 15% interest in the SouthStar Energy Services, a retail
natural gas marketing company serving the Eastern United States.
We see several compelling strategic benefits for Duke Energy, which are summarized
on slide 8. This transaction establishes a valuable natural gas infrastructure platform, which will provide strong growth opportunities for years to come. Abundant, low-cost natural gas will become an increasingly important part of the nations
energy mix as the shift away from coal continues. Duke Energy has been a leader in the coal to gas transition over the last decade and this acquisition further solidifies our leadership for the future.
Both Duke and Piedmont have a long history of service to our customers and support for the communities in which we operate. The acquisition of
Piedmonts premier utility operations will improve these capabilities and enhance our ability to provide safe, reliable energy solutions along with world-class customer service.
From a financial perspective, this transaction also provides benefits for our investors. Once completed, the transaction is quickly accretive to our
earnings and helps support the growth in our dividend. Im very excited about this transaction and the possibilities that we have in front of us. Now Ill turn the call over to Tom to discuss the strategic rationale for Piedmont, including
its customers and investors.
Tom Skains - Piedmont Natural Gas - Chairman, President & CEO
Thank you, Lynn, and good morning, everybody. On behalf of everyone at Piedmont Natural Gas, were excited about this strategic combination and look
forward to joining the Duke Energy organization. Some of you may not know that Piedmont Natural Gas was formed in 1951 from an asset sale by Duke Energy to our founding investors. So it seems fitting that we announce our return to the Duke
organization today.
We believe this transaction delivers compelling value to our shareholders. It creates a platform for future natural gas growth
beyond Piedmonts legacy service territories of North Carolina, South Carolina and Tennessee, and Dukes existing gas markets in Ohio and Kentucky. This transaction consolidates our critical natural gas and power infrastructure into one
company to greatly enhance customer service, safety, integrity and reliability.
We are also combining two very strong corporate cultures dedicated
to service, stewardship and economic development in the markets we serve. Finally, it provides our employees enhanced opportunities at one of the largest energy companies in the United States. All said, we feel this transaction provides substantial
benefits to Piedmonts customers, employees, shareholders and the communities we serve. With that, Ill turn the call over to Steve Young to talk about the financial benefits of this transaction.
Steve Young - Duke Energy Corporation - EVP & CFO
Thank you, Tom. This transaction provides significant financial benefits, as outlined on slide 10. We expect the transaction to be accretive to Duke
Energys adjusted earnings per share in the first full year after the close, or 2017. Additionally, this transaction enhances the long-term earnings growth of Duke Energy after the transaction is closed. Piedmont has strong regulated capital
growth opportunities over the next several years, which, when combined with Dukes existing growth initiatives, provides solid support to our earnings growth. The strong regulated cash flows generated by Piedmont will enhance our objectives to
sustain and grow the dividend over time.
Subject to the discretion and approval of the Board, we continue to target future annual dividend increases
at a rate consistent with our long-term adjusted earnings-per-share growth targets. The dividend will remain a key component of our overall investor value proposition. Finally, we remain fully committed to the strength of our balance sheet and
expect to finance the transaction in a manner that supports our overall credit quality and maintains our strong investment-grade ratings.
We have
had preliminary discussions with the rating agencies to explain the rationale for the transaction. We believe the agencies understand our rationale and overall objectives for our credit profile. Let me highlight how we plan to finance the
acquisition as outlined on slide 12. Our strong balance sheet gives us the flexibility to fund the $4.9 billion cash purchase price through a combination of sources. We will issue between $500 million to $750 million in equity to fund the purchase
with the remaining purchase price to be financed through holding company debt and other potential sources of cash. We have a fully committed bridge facility with Barclays in place to support the transaction.
Moving to slide 13, let me briefly highlight the approvals we expect to need in order to close the transaction by the end of 2016. At the federal level,
we will need antitrust clearance under the Hart-Scott-Rodino Act. FERC approval is not needed. At the state level, we are required to seek Commission approval in North Carolina. We also have existing merger commitments in South Carolina requiring us
to give the Commission appropriate notice of the transaction. Even though Commission approval is not specifically required in Tennessee, we will work to ensure the Commission fully understands the transaction and its benefits to customers in the
state.
We expect to begin making our initial regulatory filings in the fourth quarter. Additionally, the transaction will require Piedmont
shareholder approval. The transaction does not require Duke Energy shareholder approval. Now let me turn it over to Lynn for closing comments.
Lynn Good - Duke Energy Corporation
- President & CEO
So in closing, the transaction with Piedmont has strong, strategic and financial rationale providing Duke with more
exposure to natural gas infrastructure and strong benefits for customers, communities and investors. Were acquiring a strong, well-run business that has deep roots and a customer focus in our core Carolinas jurisdiction. I believe this
transaction provides great strategic opportunities for Duke, including the ability to expand our presence and capabilities to serve customers here in the Carolinas. I look forward to welcoming Tom and his exceptional team to the Duke family. At this
point, we will take questions. So, Bill, if youd like to open the line.
Q U E S T I O N S A N D A N S W E R S
Operator
(Operator Instructions). Dan Eggers, Credit Suisse.
Dan Eggers - Credit Suisse - Analyst
Hey, good
morning, guys. So Im really not as familiar with Piedmont as maybe I should be for this morning, but can you just walk through a little bit -- you talk about this being beneficial to growth and supporting the dividend. What kind of CapEx
opportunities do you see for the Piedmont business relative to what they are spending in 2016 and 2017 from the slides? Is there an acceleration of capital you see being deployed or some other motivations that add to the accretion aspect?
Lynn Good - Duke Energy Corporation - President & CEO
You know, Dan, we believe Piedmont has not only a great set of growth opportunities based on their financial plan, but we see opportunities with the
establishment of the platform to expand capital deployment. I think infrastructure investment around natural gas is going to become increasingly important over time. And as we look at our ongoing conversion from coal to gas, we believe that
infrastructure will be important in the Carolinas as well.
Dan Eggers - Credit Suisse - Analyst
So above
and beyond what you guys have already announced and the pipeline activities, theres going to be another layer of big pipelines coming in or is it more localized infrastructure needs?
Lynn Good - Duke Energy Corporation - President & CEO
I would say more localized is what I was referencing in those comments, Dan, but I would expand that to say, as we look at putting a pipeline or a gas
platform together and we look at the market position that Duke will have, not only in the Carolinas, but in the Midwest, we believe there will be additional opportunities to build on that and find additional infrastructure investments that will
complement the business weve put together.
Dan Eggers - Credit Suisse - Analyst
Okay, and
I guess anything about the multiple being paid? It is quite a bit higher than where you guys are trading today. To get to accretion, how much synergy benefits are embedded in that expectation that are going to be retained by the ongoing organization
to help fill in the earnings needs?
Lynn Good - Duke Energy Corporation - President & CEO
Dan, synergies were not a part of our upfront analysis on this transaction, but I believe, as you know, we have demonstrated a great ability over time to
successfully integrate businesses and we do so in a way that serves customers and investors well and that will be our objective with this transaction.
Dan
Eggers - Credit Suisse Analyst
Okay. So theres nothing -- to get to your accretion numbers, there is no synergies
involved? This is all just the straight math of Piedmonts base earnings contribution less what you guys paid for it?
Lynn Good - Duke Energy Corporation -
President & CEO
Thats correct.
Dan Eggers - Credit Suisse - Analyst
Okay.
Lynn Good - Duke Energy Corporation -
President & CEO
Thats correct.
Dan Eggers - Credit Suisse - Analyst
Okay, great. Thank you.
Operator
Shar Pourreza, Guggenheim Partners.
Shar Pourreza - Guggenheim Partners -
Analyst
Good morning. Steve, can you just touch on sort of the growth trajectory and maybe just elaborate what you mean by enhances your
growth trajectory? Is that sort of supportive of the 4% to 6% growth or incremental?
Steve Young - Duke Energy Corporation -
EVP & CFO
Well, what Id want to say initially here is that Piedmont has an excellent growth profile. Their EBITDA has been
growing at 9%. Their rate base is growing at 9%. So it will enhance our growth targets wherever they are at. When were speaking about specifics regarding the 4% to 6%, I think were starting to move into guidance and well talk more
about that in a week or so.
Shar Pourreza - Guggenheim Partners - Analyst
Got it, got it. I know its a little bit preliminary, but is there any update on the timing of the equity?
Lynn Good - Duke Energy Corporation - President & CEO
Shar, we intend to structure the initial equity in a forward and then finalize the specifics of the financing over the approval period of the
transaction.
Shar Pourreza - Guggenheim Partners - Analyst
Got it. And then just one last question. Does this transaction at all impact Piedmonts recent IMR settlement in North Carolina if there is a
potential for a rate freeze?
Lynn Good - Duke Energy Corporation - President & CEO
Tom, do you want to respond?
Tom Skains - Piedmont Natural Gas -
Chairman, President & CEO
Yes, this is Tom Skains. This transaction has no impact on our pending IMR settlement that we file with the
North Carolina Utilities Commission with the public staff. That settlement is now pending before the Commission for action and for approval, and is independent of this merger agreement.
Shar Pourreza - Guggenheim Partners - Analyst
Excellent. Congrats on the deal.
Lynn Good - Duke Energy Corporation
- President & CEO
Thank you, Shar.
Steve Young - Duke Energy
Corporation - EVP & CFO
Thank you.
Operator
Chris Turnure, JPMorgan.
Chris Turnure - JPMorganChase -
Analyst
Good morning, Lynn and Tom and Steve. Congrats on the deal.
Lynn Good - Duke Energy Corporation
- President & CEO
Thank you.
Chris Turnure - JPMorganChase -
Analyst
I wanted to get a little more color on the financing on the equity side for Duke. I respect that you guys dont want to talk about
timing there, but could you maybe give us some color on any flexibility you might have? It seems like a pretty small amount of equity issued for a deal of this size. How have your conversations gone with rating agencies so far? Are there any things
that could be in your future in terms of asset sales to help offset the need for equity here, etc.?
Steve Young - Duke Energy Corporation - EVP & CFO
Well, let me give a little color to the financing. As we said, were looking at an initial equity amount of about $500 million to $750 million.
Well do that fairly quickly. The rest of the transaction we will have some time to work on, but it will be a mix of holding company debt and cash from other sources and some examples of sources of cash we have are the CR3 securitization, which
should be finalized in 2016. Once the Florida balance sheet of the operating company is recapitalized, we would expect to be dividended to the parent in the neighborhood of $650 million. We have work structures for our international business that
allow us to take back roughly $300 million a year. So between those two next year, wed have potentially $1 billion in sources of funds. So those are the types of levers we will be looking at as we go forward.
Chris Turnure - JPMorganChase - Analyst
Okay, and then in terms of the repatriation of international cash, that $300 million that you mentioned for next year is kind of your baseline number
that youve contemplated in your math here? There is no acceleration of some of the other cash that you were going to bring back over time?
Steve Young - Duke Energy
Corporation - EVP & CFO
No, thats kind of a baseline ongoing number that weve looked at. We brought back $1.2 billion in
2015 earlier this year.
Chris Turnure - JPMorganChase - Analyst
Okay. And then could you guys just remind us of the timeframe in North Carolina for regulatory approval there? Is there a statutory requirement and how
are you guys thinking about that?
Lynn Good - Duke Energy Corporation - President & CEO
Chris, we intend to file as quickly as we can and I think in terms of statutory timeline, we have a schedule laid out in the deck. We believe that the
outside would be a year, but we intend to move as quickly as we can to get through the approval process.
Chris Turnure - JPMorganChase -
Analyst
Okay, great. Thanks very much.
Operator
Julien Dumoulin-Smith, UBS.
Julien Dumoulin-Smith - UBS -
Analyst
Hi, good morning. First question, just focusing back on the FFO metrics, could you elaborate -- in your preliminary conversations, what
kind of metrics are you talking about achieving pro forma for the transaction and what is the feedback in terms of where you stand within your current ratings [ban]?
Lynn Good - Duke Energy Corporation - President & CEO
Julien, weve had some preliminary discussions with the rating agencies and intend to continue those discussions in the near term. Were
committed to our ratings. I believe weve demonstrated commitment to the ratings over a very long period of time. Our initial equity sizing is consistent with that demonstration. And then, as Steve indicated just a moment ago, we think we have
opportunities to continue to develop a very credible balance sheet plan, as well as a plan for investors as this transaction moves through approval.
Julien Dumoulin-Smith - UBS -
Analyst
Got it. But just to clarify, if you will, the final capital structure is effectively what you will be doing by the time the deal closes.
There isnt any subsequent issuances contemplated to drive you towards the specific FFO metric over a multiyear period, correct?
Lynn Good - Duke Energy Corporation
- President & CEO
Thats a mouthful, Julien. I think --
Steve Young - Duke Energy
Corporation - EVP & CFO
I think thats generally correct. Again, were going to -- we think weve got an equity amount
that were putting forward and we can defend our credit ratings with that and our other plans, as I discussed, a mix of holding company debt and those other sources. We think that will be supportable, but weve got time and flexibility
before close here so well continue to work with our -- with the rating agencies and continue the dialogue. Weve just had preliminary discussions, but we feel confident about our abilities to deal with this transaction and defend our
credit ratings.
Julien Dumoulin-Smith - UBS - Analyst
And just to follow up a little bit on a prior question here. In terms of perspective future growth opportunities, does this impact the Atlantic Coast
Pipeline at all in any way or any adjacent pipeline?
Lynn Good - Duke Energy Corporation - President & CEO
So we are both partners in the pipeline, Julien, as you know, and in the early stage of this transaction, we will be working with our partners for them
to have an understanding of this transaction. Thats an important investment for both companies and were moving through the approval process with the FERC with construction to follow. So that project is on track.
Julien Dumoulin-Smith - UBS - Analyst
Great. Well, thank you very much.
Operator
Ali Agha, SunTrust.
Ali Agha - SunTrust Robinson Humphrey - Analyst
Good morning. Lynn, coming back to sort of the strategic rationale here on the transaction, is it fair to say when you were looking at the 4% to 6%
growth, which has been the Duke target, that the weakness in international was kind of causing that number to be harder to achieve and this is a way to get back on track? Is that a decent or an accurate interpretation of how this transaction came
about?
Lynn Good - Duke Energy Corporation - President & CEO
Ali, let me talk about that in two parts. I think as we look at the platform of Duke and the portfolio and we think about the increasing importance of
natural gas, and natural gas infrastructure, not only to meet the needs of customers directly, but to support generation of electricity, we believe that that is a platform that we would like to expand within Duke. And youve seen us do that
with initial investments in Atlantic Coast Pipeline and Sabal Trail. So you should think about this acquisition as being consistent with our belief that natural gas should be an increasing part of the Duke portfolio.
International is something that weve talked a lot about. We will talk more about it on the third-quarter call next week. There is no question that
its been a challenging year and much like were talking about adding gas to our portfolio, we will continue to monitor the performance of all aspects of our portfolio in order to position the Company best over the long term for growth. So
Id like to focus our call today on the Piedmont acquisition and well give you a good update on international next week in the third-quarter call.
Ali Agha - SunTrust Robinson
Humphrey - Analyst
Okay. And then, secondly, I guess to you, Steve, or you, Lynn, as you looked at the accretion from this transaction straight
up front, I think Im hearing you say you dont really need synergies to get there. Can you at least tell us in that math what kind of cost of debt is assumed as you run through the math here for accretion?
Steve Young - Duke Energy Corporation - EVP & CFO
Well, I think typically when you look at longer-term debt, youre in the neighborhood of and it depends on the tranching and so forth, but
you might be in the neighborhood of 4%.
Ali Agha - SunTrust Robinson Humphrey - Analyst
Okay, okay. And, Lynn, lastly, back to you. As youre looking at additional opportunities for the future of Duke, should we look at this size
transaction as currently a one-off and obviously, youll focus on getting this to work, but are you open to similar other transactions if the opportunities are there in front of you?
Lynn Good - Duke Energy Corporation - President & CEO
Ali, were focused on this one. Its important for us to pursue approval as quickly as we can. We thought this -- we believe this is an
extraordinary opportunity for our Company, for our investors, customers, etc. I think weve seen a lot of M&A activity in the industry. I suspect that will continue because of the business case of capital, but our focus is on this
transaction at this time.
Ali Agha - SunTrust Robinson Humphrey - Analyst
Thank you.
Operator
Maura Shaughnessy, MFS.
Maura Shaughnessy - MFS -
Analyst
Good morning. So its an interesting period of time. Certainly the natural gas infrastructure, I understand that and yet were
looking at the AMZ, the MLPs, all these natural gas infrastructure and these potential pipeline of pipelines, so to speak, have been destroyed in the marketplace. I think the AMZ is down over 50% just in the past year year-over-year, and yet -- and
so you would think there might be some value there. And then youre paying close to 30 times consensus, 17 earnings and close to 4 times book value for Piedmont and its -- and I get the earnings accretion given the cheap debt, but
its quite a head-scratcher for me when certainly the evolution of gas infrastructure is still very positive, especially in your neck of the woods and up in the Northeast Mid-Atlantic and yet they are wrapped in these vehicles that
everyones despised. But I wouldve thought there might be some value there. You might not have been able to lever up on the acquisition as you can on this one, but certainly strategically it seems like it would have made a lot more sense.
So perhaps please tell me Im wrong. Im looking at whats happened in the marketplace and trying to find where there is value and where there isnt.
Lynn Good - Duke Energy Corporation
- President & CEO
Maura, I appreciate those comments and I think you noted that you understand the strategic approach that were
trying to pursue here and adding more gas infrastructure to Duke. We see this as a step in that direction and that the combination will better position the Company to pursue valuable additions to the platform going forward. And so this is in our
backyard. There is a strategic value to us sitting here in the Carolinas and we believe this creates a platform for future expansion.
Maura Shaughnessy - MFS -
Analyst
But do you get my bid/ask comment just in terms of the value, how -- depending on the vehicle in which this gas infrastructure is in at
the moment, one has been smoked in the market and one has done very well and thus the spread in valuation. Im still -- Im trying to -- yes, I get the part within the state, but, yes, I dont know. Im trying to just figure it
out. I am trying to understand why the MLPs are all going to zero as well. So I guess someone doesnt like gas infrastructure businesses out there, but anyway. Okay, well, thank you.
Lynn Good - Duke Energy Corporation - President & CEO
I appreciate your comments, Maura. We can talk further. As we looked at this transaction as an opportunity to add to the portfolio at Duke, we thought it
was a strategic one and, obviously, took advantage of that opportunity and look forward to delivering great returns to our investors, not only through the dividend, but through growth. So thats our commitment and expectation.
Maura Shaughnessy - MFS - Analyst
Okay, great. Thank you.
Operator
Jim Von Riesemann, Mizuho.
Jim Von Riesemann - Mizuho Securities - Analyst
Good morning, everyone. I have a couple mechanical questions, if you dont mind. Can we talk a little bit about shareholder vote, whether its
simple or super majority and the timing of that, if there is a break-up fee? And then lastly, which is the longest -- probably the longest answer -- can you talk about the process and how this came about and if there were other competitors there?
Lynn Good - Duke Energy Corporation - President & CEO
So, Tom, do you want to talk about shareholder approval?
Tom Skains - Piedmont Natural Gas -
Chairman, President & CEO
Yes, and Ill start with your last question first. Were not permitted to talk about the process
through which this came about. That will be addressed in our proxy solicitation filings and I cant front-run that, so we will let that play out in normal course. We will, of course, be submitting a proxy solicitation to our shareholders for
shareholder vote on this matter. The voting threshold is the majority of outstanding shares and we intend to pursue that with all dispatch. So I would expect there will be a preliminary proxy filing reviewed and then the final proxy submitted for
shareholder vote in due course.
Jim Von Riesemann - Mizuho Securities - Analyst
And then what about a break-up fee? Is that all part of the -- what you would term front-running the proxy itself?
Lynn Good - Duke Energy Corporation - President & CEO
So the break-up fee, Jim, will be disclosed in the proxy, consistent with market transactions.
Jim Von Riesemann - Mizuho Securities - Analyst
Okay, thank you.
Operator
Paul Ridzon, KeyBanc.
Paul Ridzon - KeyBanc Capital
Markets - Analyst
I just lost my question and answer, but have you put any hedges in place just to protect against rising interest rates?
Lynn Good - Duke Energy Corporation - President & CEO
We have not.
Steve Young - Duke Energy
Corporation - EVP & CFO
No. No, we have not.
Paul Ridzon - KeyBanc Capital Markets - Analyst
Is that something you look at before -- as we get a little further down the road?
Lynn Good - Duke Energy Corporation - President & CEO
Yes. I would think of that, Paul, as part of us preparing for a regulatory approval process to ultimately finance the transaction. So those decisions
will be evaluated as we go.
Paul Ridzon - KeyBanc Capital Markets - Analyst
And just to clarify, you said you got accretion without putting any synergy numbers in your model.
Lynn Good - Duke Energy Corporation - President & CEO
Thats correct.
Steve Young - Duke Energy
Corporation - EVP & CFO
Thats correct.
Paul Ridzon - KeyBanc Capital
Markets - Analyst
Thank you very much.
Operator
Paul Patterson, Glenrock Associates.
Paul Patterson - Glenrock
Associates - Analyst
Good morning. Just in general, in terms of purchase accounting, were not assuming much of a write-up in tangible book
value. Is that correct?
Steve Young - Duke Energy Corporation - EVP & CFO
Thats correct. The vast majority of Piedmonts assets are regulated and therefore carry forward historical book value.
Paul Patterson - Glenrock Associates - Analyst
Okay, and then in terms of the amount of leverage that you guys are using and just what weve seen in terms of other transactions, is there any
thought about perhaps increasing the amount of leverage at the parent level, just in general? I mean it would seem to make sense I guess just sort of financially speaking if more leverage could be just put -- can be used just in general at Duke,
regardless of this merger, in particular, if you follow me.
Steve Young - Duke Energy Corporation - EVP & CFO
We look at our balance sheet as a whole and our intent is to maintain a strong balance sheet and, obviously, at the appropriate credit ratings, Paul. So
we have a lot of capital thats moving in and out and a lot of moving parts. So we will look holistically at our holding company balance sheet and keep it at the appropriate level. Thats the way we view the holding company metrics.
Paul Patterson - Glenrock Associates - Analyst
Okay. The rest of my questions have been answered. Thanks so much.
Operator
Thank you. This concludes the Q&A portion of todays call. Id like to turn it back to Lynn Good for any closing or final remarks.
Lynn Good - Duke Energy Corporation - President & CEO
So thank you, everyone, for joining this morning and for your interest and investment in Duke Energy. We look forward to making the transaction with
Piedmont a win-win for our customers, communities, employees and of course, our investors, and we will keep you updated as we move through this important approval process.
I wanted to remind you that our third-quarter earnings call will occur next week and look forward to seeing many of you at EEI in the week following.
Thanks again for joining us.
Operator
Ladies and gentlemen, we would now
like to thank you for your participation. You may now disconnect and have a wonderful day.
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Additional Information and Where to Find It
This communication does not constitute a solicitation of any vote or approval. Piedmont Natural Gas Company, Inc. (Piedmont) intends to file with
the SEC and mail to its shareholders a proxy statement in connection with the proposed merger transaction. PIEDMONT URGES INVESTORS AND SECURITY HOLDERS TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION about Duke Energy Corporation (Duke Energy), Piedmont and the proposed merger. Investors and security holders will be able to obtain these materials (when they are available) and other documents
filed with the SEC free of charge at the SECs website, www.sec.gov. In addition, a copy of Piedmonts proxy statement (when it becomes available) may be obtained free of charge from Piedmont Natural Gas Company, Inc., Corporate Secretary,
4720 Piedmont Row Drive Charlotte, North Carolina, 28210. Investors and security holders may also read and copy any reports, statements and other information filed by Piedmont with the SEC, at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SECs website for further information on its public reference room.
Participants in the Merger Solicitation
Piedmont, Duke
Energy, and their respective directors, executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding
Piedmonts directors and executive officers is available in its proxy statement filed with the SEC on January 6, 2015 in connection with its 2015 annual meeting of shareholders, and information regarding Duke Energys directors and
executive officers is available in its proxy statement filed with the SEC on March 26, 2015 in connection with its 2015 annual meeting of stockholders. Other information regarding the participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC when they become available.
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are based on managements beliefs and assumptions.
These forward-looking statements are identified
by terms and phrases such as anticipate, believe, intend, estimate, expect, continue, should, could, may, plan,
project, predict, will, potential, forecast, target, guidance, outlook, and similar expressions.
Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Such
forward-looking statements include, but are not limited to, statements about the benefits of the proposed merger involving Duke Energy or Piedmont, including future financial and operating results, Duke Energys or Piedmonts plans,
objectives, expectations and intentions, the expected timing of completion of the transaction, and other statements that are not historical facts.
Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include risks and uncertainties
relating to: the ability to obtain the requisite approvals of Piedmonts shareholders; the risk that Duke Energy or Piedmont may be unable to obtain governmental and regulatory approvals required for the merger, or that required governmental
and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; the risk that a condition to closing of the merger may not be satisfied; the timing to consummate the
proposed merger; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the
transaction making it more difficult to maintain relationships with customers, employees or suppliers; the diversion of management time on merger-related issues; and the effect of changes in governmental regulations. Additional risks and
uncertainties are identified and discussed in Duke Energys and Piedmonts and their respective subsidiaries reports filed with the SEC and available at the SECs website at www.sec.gov. In light of these risks, uncertainties
and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Neither Duke Energy nor Piedmont undertakes any obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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