Research Update: Duke Energy Corp. And Subs. Outlook Revised To Negative On Coal Ash Risks, Regulatory-Lag, And Project Delays

We expect a weakening of Duke Energy Corp.'s (Duke Energy) financial measures compared to our previous expectations and we no longer expect that Duke's financial measures will be consistently above our downgrade threshold. Specifically, beginning in 2020, we no longer expect that funds from operations (FFO) to debt will consistently be greater than 15%. Our expectations for weaker financial measures incorporate recent storm costs, uncertainty regarding certain coal ash recovery in South Carolina, potentially higher coal ash costs in North Carolina, regulatory-lag, and delays to the Atlantic Coast Pipeline (ACP) project with an in-service date that is now pushed back to 2020 for Phase 1 of the project, and 2021 for the remainder of the project. We are affirming our

...- We expect a weakening of Duke Energy Corp.'s (Duke Energy) financial measures compared to our previous expectations and we no longer expect that Duke's financial measures will be consistently above our downgrade threshold. Specifically, beginning in 2020, we no longer expect that funds from operations (FFO) to debt will consistently be greater than 15%. - Our expectations for weaker financial measures incorporate recent storm costs, uncertainty regarding certain coal ash recovery in South Carolina, potentially higher coal ash costs in North Carolina, regulatory-lag, and delays to the Atlantic Coast Pipeline (ACP) project with an in-service date that is now pushed back to 2020 for Phase 1 of the project, and 2021 for the remainder of the project. - We are affirming our ratings on Duke Energy Corp. and all its rated subsidiaries. However, we are revising our rating outlook for Duke Energy and all of its subsidiaries to negative from stable. At the same time we are lowering our stand-alone...

Research Update