Analyst sees growing chance of Duke investing in V.C. Summer

A UBS Investment Research analyst suggests that Duke Energy (NYSE:DUK) management is “greatly weighing the merits of” taking a 5%-to-10% ownership interest in the new V.C. Summer nuclear units being built in South Carolina.

V.C. Summer Units 2 and 3 are currently being constructed by SCANA (NYSE:SCG) and its minority partner Santee Cooper, which is a state-owned utility in South Carolina.

Santee Cooper currently holds a 45% interest in the Summer nuclear expansion project and has publicly sought to reduce its ownership stake in the venture. Duke is one of the parties publicly known to have taken a look at buying an interest in Santee Cooper’s minority stake.

Duke and Santee Cooper have remained mum about the status of their discussions since publicly announcing the signing of a letter of intent back in July 2011 to discuss Duke buying a portion of Santee Cooper’s minority stake.

The landscape has changed a lot since then. Duke has merged with Raleigh-based Progress Energy and just recently announced that it was promoting Lynn Good to president and CEO effective July 1. Duke has also decided to permanently close, rather than attempt to repair, the Crystal River 3 nuclear plant in Florida.

A 5% to 10% investment in the new summer units could translate into a $300m to $600m investment for Duke, said UBS Analyst Julien Dumoulin-Smith. Adding that nuclear capacity, together, with potential transmission upgrades in Florida, could help Duke address the potential retirement of Crystal River 1 and 2 fossil units in Florida sometime between 2015 and 2018, Dumoulin-Smith wrote.

In addition, subsidiary Duke Energy Florida is said to be drawing up a significant request for proposals (RFP), the analyst said. “We are currently evaluating our options and the next steps we will take,” a Duke spokesperson said June 25. “At this time, we have not issued an RFP,” the company representative added.

“Addressing future generation needs in the Carolinas, we look for its [Duke’s] Integrated Resource Plan in 2013, to fuel a certificate of need in 2014, seeking to build at least a single new CCGT [combined cycle gas turbine] as well as a couple additional CTs [combustion turbines] for the ~2017 time frame,” Dumoulin-Smith said.

A Santee Cooper spokesperson said discussions with Duke about an ownership stake in units 2 and 3 are ongoing. While Santee Cooper currently holds the rights to 45% of the new nuclear units, it is interested in lowering its stake significantly.

Units 2 and 3 are being built alongside the existing V.C. Summer unit in Fairfield County, S.C. Each of the new units, scheduled for completion in 2017 and 2018, will have a capacity of 1,100 MW.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.