Analyst still expects Duke to take minority stake in S.C. nuclear units

Duke Energy (NYSE:DUK) could be waiting for the right moment to take a minority ownership stake in two new nuclear units being developed at the V.C. Summer station in South Carolina, according to an Oct. 14 assessment by UBS Investment Research.

Duke has long been in discussions with state-owned Santee Cooper about buying some of the authority’s 45% ownership stake in Summer Units 2 and 3 now under construction in Fairfield County, S.C.

SCANA (NYSE:SCG) is the majority (55%) owner in the new Summer units, which would generate roughly 1,100 MW each. UBS has said the units are entering a crucial construction period and additional delays seem likely.

“We continue to expect [management] to announce plans to take a 5-10% stake,” according to a UBS review led by Julien Dumoulin-Smith. While Duke would benefit from South Carolina’s “advantageous” construction work in progress (CWIP) recovery through its Base Load Review Act (BLRA) rider, it remains unclear how/if there will be comparable treatment in North Carolina, UBS said.

In September, Duke President and CEO Lynn Good told the Barclays Capital Conference she is not ready to place a timetable on when Duke will make a decision on the new nuclear investment.

On the coal front, UBS said Duke Energy is moving toward “final commercialization” of the Edwardsport IGCC (integrated gasification combined-cycle) facility in Indiana.

“While the plant has operated as a traditional CCGT [combined-cycle gas turbine], we note some risk around hiccups in successful firing with syngas created from coal,” UBS said. “While the commission has deemed the plant ‘in-service’, this is a modest risk in our view,” UBS added in the analysis.

In addition, UBS suspects that some strategic actions on merchant generation could be coming at Duke. Like other integrated power generators, Duke is “pursuing the strategic exit of its merchant generation,” UBS said.

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.