Duke Energy Indiana Unit Aims $1.9B Grid Upgrade Plan - Analyst Blog


Duke Energy Corp. ( DUK ) unit Duke Energy Indiana has filed a plan with the Indiana Utility Regulatory Commission to modernize its statewide electric grid to help reduce power outages by adding "self-healing" smart technologies to the grid.

Under the seven-year upgrade plan, worth $1.9 billion, the company intends to replace substations, utility poles, power lines, transformers and other aging parts of its electric grid. This comprises installing new, advanced utility meters that will result in fewer and shorter electrical outages.

Indiana's largest electric utility, Duke Energy Indiana, serves approximately 800,000 customers comprising Hoosier homes, businesses and industries. Upon successful approval of the plans, the utility can pass 80% of the investments to customers through a provision called a "tracker," which is an additional charge on their monthly bill. For the balance 20%, the company will seek to pass it to its customers during its next base rate case, which must be filed before the end of the seven-year upgrade project.

Duke Energy said that its Indiana customers would see rate hikes averaging about 1% per year between 2016 and 2022 if regulators approve the upgrade plan. Although the plan would lead to a rate increase, the modernization work will generate more than 5,000 Indiana jobs over the seven-year period. There is also an estimated state and local tax impact of approximately $180 million.

Duke Energy is a premier utility service provider offering efficient power and energy services across various states in the U.S. and several other international locations. We appreciate the company's efforts to expand its scale of operations and utilize modern technologies.

Duke Energy's disciplined capital investments support organic growth projects and efficiency improvement measures. Between 2014 and 2018, Duke Energy plans to invest a total of $15-$20 billion primarily for new generation, infrastructure projects and regulatory compliance.

Recently, Duke Energy reported second quarter 2014 earnings that came in ahead of the Street expectation by 11% and increased 27.6% year over year. It also boosted its full year 2014 earnings guidance range to $4.50-$4.65 per share from its previous forecast of $4.45-$4.60 per share. It had earlier pegged its longer-term average annual growth at 4% to 6% through 2016.

Duke Energy presently holds a short-term Zacks Rank #3 (Hold). Other better-ranked players in the sector include Huaneng Power International, Inc. ( HNP ), CMS Energy Corp. ( CMS ) and ALLETE, Inc. ( ALE ). Huaneng Power International holds a Zacks Rank #1 (Strong Buy), while CMS Energy and ALLETE carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: DUK , CMS , ALE , HNP



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