Troubled plants to cost Duke Energy $280 million

Troubled plants to cost Duke Energy $280 million

Troubled plants to cost Duke Energy $280 million

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by BRUCE HENDERSON / Charlotte Observer

WCNC.com

Posted on October 31, 2012 at 1:39 PM

CHARLOTTE, N.C. -- Duke Energy said Wednesday it will take another $180 million charge on its third-quarter earnings, to be reported next week, because of rising costs at its new Edwardsport power plant in Indiana.

A second troubled plant, in Florida, will cost Duke another $100 million, the utility said.

Edwardsport will now cost more than $3.5 billion, including $400 million in financing charges, Duke said in a securities filing. The plant was initially expected to cost about $2 billion.

Duke took a $420 million charge on Edwardsport in its first-quarter earnings and $265 million in charges in 2010 and 2011.

The plant uses new technology that turns coal into gas, sharply reducing air emissions, but has been beset by cost overruns. Duke on Wednesday moved its expected start-up date from early next year to mid-2013.

Duke blamed lower than expected revenues from the plant’s output during the test phases and delays due to “more extensive testing conditions” for adding $174 million to its cost.

Duke struck a deal in April with Indiana’s consumer advocacy agency and large industrial customers to cap Edwardsport’s costs to customers at about $2.6 billion, including financing costs through mid-2012. The Indiana Utility Regulatory Commission has not ruled on whether it will accept the plan.

In a separate filing, Duke reported that subsidiary Progress Energy Florida will record a $100 million charge against third-quarter income from its Crystal River nuclear plant. The charge will not be reflected in Duke Energy's earnings.

The plant has been shut down since 2009 after a botched component-replacement project cracked concrete in its reactor containment structure. Duke is deciding whether to repair the plant, estimated to cost up to $3.5 billion, or retire it.

An agreement the Florida Public Service Commission approved in February triggered the expected $100 million charge. Progress agreed to refund to Florida customers $100 million the utility spent to buy replacement power while Crystal River was not operating if repairs don’t begin by the end of this year.

Duke now says it “is unlikely to be in a position to begin the repair” by year’s end. At a conference Monday on Crystal River, Duke said a decision to fix or retire the plant will be made between December and the summer of 2013.

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