TEXT-Fitch on Duke Energy ratings and Crystal River 3 nuclear unit
Feb 5 - Duke Energy Corp.'s (DUK) decision to retire the Crystal River 3 nuclear unit (CR 3), owned by subsidiary Progress Energy Florida (PEF), has no immediate impact on PEF's ratings and Rating Outlook(Issuer Default Rating 'BBB+' with a Negative Outlook), according to Fitch Ratings. While Fitch considers the retirement decision to be constructive due to the rising repair cost estimates, construction risks and low gas price environment, a number of uncertainties remain including the regulatory treatment of the sunk costs, the type and cost of replacement power and PEF's ability to manage costs during a rate freeze that extends through 2016. CR3 has been out of service since September 2009 and out of rate base since Jan. 1, 2013. A rate settlement agreement approved by the Florida Public Service Commission (FPSC) establishes a framework for the treatment of CR3 costs. Under a retirement scenario the settlement permits PEF to seek recovery of CR3's embedded cost in 2017 at a reduced return on equity (ROE) equal to 70% of the company's prevailing authorized ROE. Importantly, the agreement also allows the recovery of on-going replacement power costs. The unrecovered investment is approximately $1.6 billion, which includes the $375 million depreciated original cost plus the steam generator and containment repair costs, nuclear uprate, nuclear fuel and material and supplies that have yet to be approved for recovery and subject to review by the FPSC. The revenue requirement is in excess of $200 million. Separately, DUK announced it had reached a settlement with its insurance carrier, the Nuclear Electric Insurance Limited (NEIL), through a mediation process. The settlement provides for recovery of an additional $530 million, which will ultimately be flowed back to rate payers. NEIL previously paid PEF $305 million. The ability to control costs during the rate freeze period and to improve credit metrics will be the key rating driver in the near-term. Credit metrics have been trending downward over the past two years, but should stabilize in 2013 due to a $150 million tariff increase implemented Jan. 1, 2013. EBITDA/interest and Debt/EBITDA are expected to approximate 5.0x and 3.75x, respectively, which Is moderately weaker than its peer group. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (Aug. 8, 2012); --'Parent and Subsidiary Rating Linkage' (Aug. 12, 2011); --'Recovery Ratings and Notching Criteria for Utilities' (May 3, 2012). Applicable Criteria and Related Research: Corporate Rating Methodology Parent and Subsidiary Rating Linkage Recovery Ratings and Notching Criteria for Utilities
DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.