Duke Energy to Cut Costs Up To $450 Million Due to COVID-19, Mild Winter

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Duke Energy (NYSE:DUK) (Charlotte, North Carolina) plans to cut costs this year by $350 million to $450 million in response to an expected drop in electricity demand caused by the COVID-19 pandemic and a milder-than-usual winter, executives with the power company said Tuesday. While the cost-saving initiatives don't appear to affect major capital expenditures, the company does intend to defer some of its planned outages.

Industrial Info is tracking $10.7 billion in project activity by Duke Energy, including $415 million worth of maintenance projects. The company provides utility electricity and natural gas services primarily in the Southeast.

Click on the image at right for a graph showing Duke Energy's project activity by state.

The company reported net income of $899 million during the first quarter of this year, and adjusted earnings per share of $1.14, reflecting milder-than-usual weather and storm costs, which totaled 15 cents per share.

"We began to take cost mitigation actions in February as we saw the impact of the mild winter, and we are building on those actions to address COVID-19," Chief Executive Officer Lynn Good said during Duke Energy's earnings conference call.

The company is projecting a 25-cent to 35-cent reduction in earnings per share this year due to COVID-19, "which is consistent with stay-at-home policies for midsummer and a gradual economic recovery beginning in the third quarter and continuing over the balance of the year," Good said.

Chief Financial Officer Steve Young said he expects a 3% to 5% decline in retail sales volumes for the year.

"We are forecasting the deepest declines in volumes compared to 2019 in both the second and third quarter, with a gradual economic recovery beginning in the latter half of the third quarter and extending beyond the end of the year," he said. In response to the situation, "We are confident we can reduce our (operation and maintenance) and other expenses by approximately $350 million to $450 million in 2020."

Among other cost-saving measures, "we are optimizing the timing and strength of our 2020 planned outages," Young said, as Duke Energy's generating assets are expected to run less during the year. He did not elaborate on which planned outages are affected.

Regarding capital expenditures, Good noted that in April, Duke Energy filed a 10-year, $6 billion plan with Florida regulators to harden its electrical grid in the state against storms and hurricanes, with the aim of reducing restoration costs and outage times associated with extreme weather. Florida's state legislature passed a law in 2019 mandating that the state's investor-owned utilities to file storm protection plans. Click here for a list of medium- and high-probability Duke Energy projects in Florida.

Good also touched on the status of the Atlantic Coast natural gas pipeline project, saying she expects a ruling from the Supreme Court regarding the pipeline's Appalachian Trail crossing in the coming weeks. The $8 billion pipeline will carry up to 1.5 billion cubic feet per day of natural gas from the Utica and Marcellus shales in West Virginia to eastern North Carolina. Duke Energy is part of a consortium, including Dominion Energy Incorporated (NYSE:D) (Richmond, Virginia), that is building the pipeline. The U.S. Forest Service granted permission for the pipeline to run under the Appalachian Trail in Virginia, which was invalidated by the Fourth Circuit of Appeals, and the matter was appealed to the Supreme Court.

"We expect the (Forest Service) to reissue the permit in mid-2020, and to date have not seen any significant delays in the progress of the work from COVID-19," Good said. For related information, see May 7, 2020 article - Dominion Doubles Down on Renewable Energy, Awaits Decisions on Atlantic Coast Pipeline, and click here for related projects.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.