Summary
Duke Energy Corporation (DUK) filed an 8-K on September 17, 2010, to report a material impairment related to its subsidiary, Duke Energy Indiana, Inc. The report details a settlement agreement reached concerning the construction cost increases for the Edwardsport clean coal gasification plant. This settlement involves a reduction in equity return for costs exceeding $2.35 billion and establishes a cap on recoverable construction costs for customers at $2.975 billion.
Key Highlights
- 1Duke Energy Indiana, Inc. has reached a settlement regarding cost overruns for its Edwardsport clean coal gasification plant.
- 2The company will record a pre-tax charge to earnings of approximately $35 to $45 million in Q3 2010.
- 3This charge is based on an estimated project cost of $2.88 billion.
- 4A 150 basis point reduction in equity return will apply to construction costs exceeding $2.35 billion.
- 5Customer recovery for project construction costs will be capped at $2.975 billion.
- 6The settlement is subject to approval by the Indiana Utility Regulatory Commission (IURC), meaning the final impact could change.
Frequently Asked Questions
This 8-K filing announces a settlement agreement reached by Duke Energy Indiana, Inc. concerning cost increases for its Edwardsport clean coal gasification plant. This settlement requires the company to record a material impairment charge.
Duke Energy expects to record a pre-tax charge to earnings of approximately $35 to $45 million in the third quarter of 2010. This is due to construction cost estimates for the Edwardsport plant exceeding previous projections.
Yes, the settlement agreement caps the project's construction costs that can be passed on to customers at $2.975 billion. Costs exceeding this amount will not be recoverable from customers.
The settlement agreement is subject to approval by the Indiana Utility Regulatory Commission (IURC). Until approved, the terms and the ultimate financial impact on Duke Energy and its customers remain subject to change.