Supply chain issues delaying some Duke Energy commercial renewable projects

Duke Energy Corp. management expects some near-term delays to nonregulated renewable project development due to supply chain constraints.

Company Executive Vice President and CFO Steve Young said Feb. 10 during the fourth-quarter 2021 earnings call that in commercial renewables, the company expects fewer projects in 2022 as it ramps up deployment of renewable energy assets at regulated utilities in Florida and the Carolinas, providing "breathing room to work through supply chain challenges."

Duke Energy Chair, President and CEO Lynn Good noted that out of the utility's $63 billion in capital expenditures budgeted over the next five years, about 80% is allocated toward its clean energy transition.

The timing of some commercial renewable projects will shift within the five-year plan, Young said, including pushing off several hundred megawatts of generation projects to 2023 or later.

"It may be in the neighborhood of 400 [MW] or 500 MW, something of that nature," Young said.

Duke Energy now owns, operates or purchases more than 10,000 MW of solar and wind energy and plans to reach 16,000 MW by 2025 and 24,000 MW by 2030, Good said. One day ahead of its earnings call, Duke Energy announced plans for a total exit from coal by 2035. According to the company's earnings presentation, coal and oil resources comprised about 22% of its generation portfolio in 2021.

While the company has thus far avoided any major impacts to capital plans from supply chain problems, Good acknowledged it has experienced issues with solar panels.

"There are areas where lead times are increasing, but we feel well-positioned given the scale of the company and the approach we're taking," Good said, adding that regulated renewable project timelines have so far not been significantly affected.

Availability of solar panels is the "first and most gating item because of some of the restrictions around trade and other things," Good said. Duke Energy has seen issues with certain suppliers unable to meet initial timelines. The utility has looked for alternatives, which Good said could be more expensive, leading the company to push some project timelines.

"We're very confident in our projects that we have identified for [2023] that we have appropriate supply and are ready to go," Good said.

The increase in capital Duke Energy has put forward "should give you confidence that we're going to keep going and have the investment portfolio to drive 5% to 7% [earnings per share growth rate]," Good added.

Results

Duke Energy reported 2021 full-year reported adjusted earnings of $4.03 billion, or $5.24 per share, compared with $3.77 billion, or $5.12 per share, for 2020. The S&P Capital IQ consensus normalized EPS estimate for Duke Energy in 2021 was $5.23.

For the fourth quarter of 2021, the company reported $736 million in adjusted earnings, or 94 cents per share, compared with $777 million, or $1.03 per share, in the prior-year period. The consensus normalized estimate was 97 cents per share for Duke Energy in fourth quarter 2021.

Lower adjusted results for the quarter compared to the prior year's quarter were driven by mild weather, fewer renewable projects placed in service and share dilution, partially offset by lower income tax expense, the company said in its release.

Duke Energy said it is targeting a growth rate of 5% to 7% in adjusted earnings through 2026 as it transitions toward cleaner generation and modernizes its grid. Duke also expects to post adjusted earnings in 2022 between $5.30 and $5.60 per share, up from the $5.24 the company posted in 2021.