Duke Energy talks coal, gas issues during 3Q review

Duke Energy (NYSE:DUK) said Nov. 6 that its landmark Edwardsport IGCC project in Indiana is operating as expected.

Duke is going through the General Electric (NYSE:GE) new product introduction protocol and all systems are working as designed, Duke President and CEO Lynn Good said during the quarterly earnings call.

When Duke brought online the 618-MW Edwardsport integrated gasification combined cycle online officially in June, it estimated Edwardsport would build up to its long-term level of availability over 15 months.

That process is continuing, and Good expects performance to continue to improve over time. Duke is seeing good performance from the plant’s gasifiers with significant run times, the company says.

Commissioning Edwardsport was one of many near-term priorities that Duke has addressed this year. Others include deciding to retire the Crystal River 3 nuclear unit in Florida; resolving North Carolina regulatory investigations that followed the Progress Energy merger; and addressing rate cases and regulatory decisions in many states.

Duke has been gradually releasing 1,100 employees through a voluntary severance program following the Progress merger.

Duke 4Q13 results should benefit by regulatory decisions on how the company can account for the regularly-scheduled refueling and maintenance outages at its nuclear plants in the Carolinas, officials said.

Nuke performance, nuclear investment discussed

Duke also achieved 3Q13 nuclear capacity factor of 97%. “During the critical summer months of June through August” the rate was 99%, Good said.

During the earnings presentation, Duke continues to talk openly about its interest in investing in Santee Cooper’s portion of V.C. Summer nuclear units 3 and 4 currently under construction in South Carolina.

While still not offering a timetable for a decision, Good went into more specifics than she has in the past. The CEO noted that Duke’s integrated resource plans do show potential need for new nuclear generation in several years.

In the event that Duke should take a 10% stake in the new Summer units, most of the energy would be needed in North Carolina, Good indicated.

Duke Energy Ohio recently made a cost-based capacity filing with the Public Utilities Commission of Ohio (PUCO). The filing seeks to recover $729m of capacity costs. “Clarity on this filing will help inform our long-term strategic decisions about Midwest generation fleet,” Duke said in its slide presentation.

Duke continues to look to expand its natural gas-fired generation.

Duke recently announced that it had filed for South Carolina approval to build a new 750-MW combined-cycle gas plant at its existing Lee power station grounds. If approved, the plant could be brought online in 2017. North Carolina Electric Membership Corporation (NCEMC) will be a minority owner.

In a slide on the Duke coal fleet, Duke says that the 200-MW of generating capacity at Lee Units 1 and 2 could be retired by 2015 while the 170-MW of generating capacity is expected to be converted to gas in 2014.

Next year Duke plans to finalize a 1,640-MW request for proposals (RFP) for natural gas-fueled capacity in Florida. The gas power RFP would help make up for the loss of the CR3 nuclear unit as well as potential retirement of two neighboring coal units, Crystal River 1 and 2, Good said.

The company’s non-regulated businesses are pursuing “disciplined growth” of renewable energy.

Duke said quarterly “weather-normalized” load increased 1.7% compared to the prior year. In Charlotte, where Duke is based, the company saw its “mildest” weather quarter since 2004, company officials said.

Reported third quarter 2013 adjusted diluted earnings per share of $1.46, compared to $1.47 for 3Q12. Reported diluted EPS for 3Q13 was $1.42, compared to 85 cents for the same period last year.

Reported results include special items that are excluded from the company’s adjusted diluted EPS results. In the company’s regulated businesses, revised customer rates, increased weather normalized retail volumes and wholesale net margins were partially offset by unfavorable weather and higher depreciation and amortization expense during the third quarter of 2013.

“Our third quarter results were supported by the constructive regulatory outcomes we achieved this year,” Good said. “As a result, we are narrowing our 2013 adjusted diluted EPS guidance range to $4.25 to $4.45.”

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.