Duke Energy to Construct $250M LNG Storage in North Carolina

Duke Energy Corporation’s DUK subsidiary, Piedmont Natural Gas, recently announced its plans for constructing and operating a liquefied natural gas (LNG) facility in Robeson County, NC. The initiative is in line with the company’s strategy to make consistent investments in natural gas infrastructure, with the planned facility expected to be the most cost-effective solution appropriate for peak usage days.

Details of the Project

Piedmont Natural Gas’ planned LNG storage will be a 1 billion-cubic-foot (Bcf) facility, set to cover roughly 50 acres of a 685-acre piece of Piedmont-owned property. The construction work is expected to begin in the summer of 2019, which is estimated to get completed in two years' time. The project, valued approximately $250 million, will be the fourth LNG facility of Piedmont Natural Gas.

Prospective Benefits of the Project

The newly planned facility will aid Piedmont Natural Gas continue providing its local customers with a reliable supply of natural gas during peak usage days, especially when extremely low temperatures create a higher-than-normal demand for natural gas.

On the economic front, the project is expected to deliver significant benefits to local communities, alongside driving growth. During the construction period, the project is anticipated to create up to 400 local jobs and 10 to 12 permanent jobs for managing operations. Further, Robeson County is estimated to receive annual tax revenues of approximately $0.8-$1 million, which, on a larger scale, will benefit local services such as health care, schools and emergency response.

Our View

In the first quarter of 2018, earnings for the company’s Gas Utilities and Infrastructure segment witnessed a year-over-year increase of 18.8% compared to the prior year. The increase was largely driven by customer growth and increased investments at Piedmont. In this line, we may expect this segment to witness further growth, following due completion of the latest facility’s construction and realization of its expected benefits.

Notably, Duke Energy has been making capital investments in its infrastructure and expansion projects across its service territories. Per its long-term plans, the company intends to spend $30 billion for electric utilities and infrastructure, and reduce its capital expenditures by approximately $1 billion for the 2018-2022 period. These investments are expected to drive the company’s earnings base growth in the combined electric and gas businesses by approximately 6%, over the next five years.

Apart from these valuable investments, favorable rate case decisions should also boost the company’s operating results, in terms of its Gas Utilities and Infrastructure segment. Evidently, in February 2018, the
North Carolina Utilities Commission issued an order approving new rates associated with its $8.1 billion rate base, which includes Duke Energy’s investments in four new solar projects and gas-fired generation at Sutton and Asheville.

Consequently, we believe such planned investments along with significant growth initiatives that the company has undertaken will enable it provide safe, reliable and cost-effective natural gas solutions to its
growing customer base.

Price Movement

Duke Energy has lost 4.1% in the last 12 months compared with the industry’s decline of 1.5%. The underperformance may have been caused by the potential volatility in market prices of fuel, electricity and other renewable energy commodities.

Zacks Rank & Key Picks

Duke Energy currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the same industry include NRG Energy, Inc. NRG, Algonquin Power & Utilities Corp. AQN and Ameren Corporation AEE.

While NRG Energy and Algonquin Power & Utilities sport a Zacks Rank #1 (Strong Buy), Ameren Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NRG Energy pulled off an average positive earnings surprise of 507.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings moved up 24 cents over the past 90 days.

Ameren Corporation reported average positive earnings surprise of 7.69%% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 2 cents over the past 90 days.

Algonquin Power & Utilities reported average positive earnings surprise of 28.56% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved up by 9 cents over the past 90 days.

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