Duke's Rogers: Edwardsport to go online within weeks

Duke Energy Jim Rogers Edwardsport integrated gasification combined cycle power plant Indiana

By Wayne Barber, Chief Analyst, GenerationHub

Construction is complete and testing is entering the home stretch on the 618-MW Duke Energy (NYSE:DUK) Edwardsport integrated gasification combined-cycle (IGCC) project in Indiana.

Duke Energy Chairman and CEO Jim Rogers said May 3 that the coal gasification project will enter service “later this month.” He updated the Edwardsport project during Duke’s regular quarterly earnings call.

The Indiana Utility Regulatory Commission has approved Duke Energy Indiana passing on $2.65bn in capitalized costs to ratepayers for the IGCC project when the plant is completed, plus an additional $650m or more in financing costs.

Duke first got state approval for the next generation coal plant in late 2007.

“Both gasifiers have successfully produced syngas from coal” and electricity has been generated by the turbines, Rogers said. Rogers also said that the 625-MW Sutton natural gas plant in North Carolina should be ready to enter service in 4Q 2013. Sutton is 77% complete. The company has spent $475m to date on a total budget of $600m. (The amounts include direct capital and AFUDC).

In addition, Rogers said Duke is engaged in cases before the Public Service Commissions of North Carolina and South Carolina that affect fleet modernizations.

The Duke CEO expressed confidence that a 10.5% return on equity will survive challenge in North Carolina. Rogers said a state court did not overturn the rate but instead called upon the North Carolina Utilities Commission to provide more details to justify the rate.

In addition to retiring or retrofitting some of its oldest coal units, Duke successfully built the new Cliffside coal unit as well as the Dan River combined-cycle natural gas plant in North Carolina.

Looking forward Duke has identified roughly 3,400 MW of coal-fired generation that has at least the “potential” to be retired or replaced by natural gas by 2016 in the Carolinas, Florida, Indiana, Ohio and Kentucky.

While natural gas prices are on the rise, Duke is seeing some switching from gas to coal in the Midwest but less so in the Carolinas. Coal plant capacity is running higher in North and South Carolina, but the gas price has to be about $4.50 to trigger much switching in the Carolinas, Roger said.

Rogers also discussed the May 2 announcement that Duke would not continue to pursue licenses for two new reactors at the Harris nuclear station in North Carolina.

Duke is also preparing to file a decommissioning plan for the Crystal River 3 nuclear plant in Florida. Earlier this year Duke announced plans to permanently retire the plant, which has been idle since late 2009. Duke will soon start winnowing down the staff at Crystal River, Roger said.

Duke reached a CR3 settlement with its insurer Nuclear Electric Insurance Limited (NEIL) in February and has collected an additional $530m for Florida customers, Rogers said.

The CEO noted that Duke is now 10 months into its merger with Progress Energy and is already experiencing fuel and joint dispatch savings in the Carolinas.

Rogers is set to retire at the end of 2013 and he said that a special committee that reports to the board of directors is busy with a CEO search.

First quarter 2013 adjusted diluted earnings per share (EPS) were $1.02 compared to $1.13 for 1Q12.

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