Another securitization of surcharges tied to utility infrastructure upgrades, known as storm recovery bonds, is in the pipeline from Duke Energy Carolinas NC Storm Funding II, to raise $582.1 million.
The deal sells notes to investors through an A1 and A2 tranche, which mature in July 2036 and January 2048, respectively. Duke Energy Carolinas, provides electric service to about 2.4 million metered retail electric customers in North Carolina and places surcharges on customer bills, according to analysts at Moody's Ratings and S&P Global Ratings.
Duke Energy will use the proceeds from the securitization to recover certain distribution-related storm restoration costs stemming from a series of severe storms, including hurricanes Helene in 2024, Ian and Zeta in 2020, and winter storm Izzy in 2022, according to Moody's.
North Carolina authorizes Duke Energy to create the storm recovery charge and bill and collect them from customers through a financing act. The financing order allows the energy company to adjust the charge on consumer bills semiannually, to ensure cashflow to the bonds, Moody's said.
The deal also counts on Duke Energy's strong position as the largest subsidiary of the holding company, as well as its A2 rating with a stable outlook, according to Moody's.
Challenges to legislation that facilitates the financing order could be one potential credit challenge to the notes, Moody's said.
Moody's assigns Aaa to both classes of notes, and S&P assigns AAA.
