What is the primary reason for the cost increase in the Edwardsport IGCC project?

The primary reason for the projected cost increase of approximately $102 million is attributed to labor productivity trends observed in the project's progression.

Will Duke Energy Indiana exceed its previously stated project cost?

Duke Energy Indiana indicated that despite the updated cost forecast, it plans to actively mitigate incremental costs to remain within the most recent cost estimate of $2.72 billion (excluding AFUDC). However, AFUDC costs have increased significantly due to regulatory delays.

What is AFUDC and why is it increasing?

AFUDC stands for Allowance for Funds Used During Construction. It represents the cost of borrowed funds and equity capital used to finance construction work in progress. The increase of $114 million is attributed to delays in the processing and approval of Construction Work in Progress (CWIP) rider proceedings by the IURC.

Does the company have a hard cap on the project's construction costs?

Yes, in an earlier filing, the company proposed a hard cap of approximately $2.72 billion on construction costs. However, it's important to note that this commitment does not include increases associated with AFUDC financing costs, which have risen due to regulatory delays.

Duke Energy CORP 8-K SEC Disclosure

Summary

Duke Energy Indiana, a subsidiary of Duke Energy Corporation, filed testimony on June 27, 2011, with the Indiana Utility Regulatory Commission (IURC) regarding its Edwardsport Integrated Gasification Combined Cycle (IGCC) project. The filing provides an updated cost forecast for the project, increasing the estimated construction cost by approximately $102 million to $2.82 billion, primarily due to labor productivity trends. Additionally, the company is forecasting a potential $30 million for start-up event risks. The company also noted an increase of $114 million in Allowance for Funds Used During Construction (AFUDC) due to delays in CWIP rider proceedings. Despite the increased forecast, Duke Energy Indiana stated its intention to manage the project to remain within its previously stated cost estimate of $2.72 billion, excluding AFUDC, by mitigating incremental costs. The filing clarifies that a prior commitment to a hard cap of $2.72 billion on construction costs does not include AFUDC financing cost increases.

Key Highlights

1Duke Energy Indiana's Edwardsport IGCC project cost forecast increased by $102 million to $2.82 billion (excluding AFUDC) due to labor productivity.
2An additional $30 million is forecasted for potential start-up event risks.
3Allowance for Funds Used During Construction (AFUDC) costs are estimated to increase by $114 million due to delays in CWIP rider proceedings.
4The company aims to mitigate incremental costs to stay within the previous $2.72 billion construction cost estimate (excluding AFUDC).
5A previously proposed hard cap of $2.72 billion on construction costs does not encompass AFUDC increases.
6The filing was made with the Indiana Utility Regulatory Commission (IURC) on June 27, 2011.

Duke Energy CORP 8-K Report, Corporate Update (Jun 27, 2011)

Summary

Key Highlights

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