Economic factors, plus low power prices, an ice storm, a rate refund and pension fund problems have led Standard & Poor’s (S&P) to revise the outlook for Duke Energy from stable to negative.

The ratings agency announced the changed outlook to the A-rated energy giant Friday, saying the action reflected “the continuous negative developments facing the company in both its regulated and unregulated operations. Of particular concern is a weaker than anticipated economic environment in its service territory,” S&P said. This will cut the cash flow from its regulated electric business and its merchant energy unit.

S&P also expects the growth of gas transmission revenues to slow as the company reduces total capital expenditures. Since Duke lost the “+” after the A in August, three gas-fired power plants have been indefinitely postponed in the U.S., and two others have been postponed in Brazil. The ratings agency also noted a $25 million rate refund stemming from a Duke Power settlement with North and South Carolina customers approved by the state utility commissions (see Power Market Today, Nov. 26). The company also recognized a $772 million charge to retained earnings due to an unfunded pension obligation.

Costs from the recent ice storm in the Carolinas, which Duke has labeled as the most damaging in its history, have yet to be calculated, the ratings agency said. At one point Duke had more than a million customers without power during the storm earlier this month.

Duke Energy must reduce debt to counter the attendant erosion in revenues in order to maintain its financial cushion and ratings, S&P said.

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