Last Christmas was not a particularly merry one for Duke Energy. The Charlotte, North Carolina-based company imposed rolling blackouts on its customers during a winter storm – leaving more than half a million of them without power on Christmas Eve. Even worse? Duke gave South Carolina regulators “zero warning” about its precarious grid situation, prompting a sharp rebuke from the S.C. Office of Regulatory Staff (SCORS).
In addition to the unexpected blackouts, the company controversially jacked rates on its poorest Palmetto State customers last September – part of an ongoing campaign to foist the consequences of poor executive decision-making onto ratepayers who can ill afford such added costs.
As I noted at the time, though, Duke’s short-term issues are nothing compared to the price tag associated with its catastrophic mismanagement of asset allocation.
“Duke has made terrible decisions regarding its energy mix – decisions which are already costing ratepayers billions of dollars,” I noted in a post last spring.
After peaking at $115.35 a share last April, Duke has seen its value plummet. Last month, the stock was trading as low as $88.27 – a staggering 23.5 percent decline. It has since rebounded, but analysts remain unimpressed – especially given its escalating debt during a time of high-cost refinancing.
While the Wall Street consensus is for Duke to continue with “business as usual” heading into 2024, others see warning signs on the horizon. Last week, Seeking Alpha posted a negative outlook on Duke’s stock, specifically referencing “approaching high debt levels that may reduce its ability to finance dividends.”
“Few things threaten a regulated utility stock, and one of them is the mismanagement of debt,” the analysis noted. “High leverage presents a risk factor that the market is neglecting and will come into play in 2024.”
Blasting the company’s recent infrastructure investments as “cheaply financed growth,” Seeking Alpha slammed Duke for failing to achieve improvements in “asset efficiency” – concluded the stock was overvalued by as much as 17 percent based on future revenue projections.
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“Duke may have difficulties financing dividends and needs to resort to using debt,” the analysis noted. “However, the price of refinancing is not optimal and may get worse in the future.”
“The key takeaway is that the fixed costs to the bottom line will increase,” it concluded.
The one thing that could bail Duke out (aside from massive new rate hikes on consumers)? Crony capitalism.
Citing Duke’s plan to be carbon neutral by 2050, Seeking Alpha noted its “partnership” with the government – which could give the company “access to beneficial financing for capital projects.”
Bottom line? Duke’s only way out of its current mess is to continue passing the buck onto ratepayers and taxpayers …
In most “Republican” states, such fleecing would never be tolerated. Sadly, South Carolina leaders continue eagerly accommodating such crony capitalist enabling … no matter how much it costs their citizens.
ABOUT THE AUTHOR …
Will Folks is the founding editor of the news outlet you are currently reading. Prior to founding FITSNews, he served as press secretary to the governor of South Carolina and before that he was a bass guitarist and dive bar bouncer. He lives in the Midlands region of the state with his wife and seven (soon to be eight) children.
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