Duke Energy Corp. believes it has sufficient liquidity and a strong mitigation plan to offset the earnings impact and drop in retail sales prompted by the COVID-19 pandemic.

Duke Energy on May 12 said it expects retail electric sales to fall 3% to 5% for full year 2020 based on a gradual economic recovery, which would negatively impact the company's 2020 earnings per share by 25 cents to 35 cents.

"We've looked at many different types of forecasts as to how the economy responds to this unprecedented situation. We have a base case and the base case reflects that there is a recovery of the economy in the latter part of 2020," Duke Energy Executive Vice President and CFO Steven Young told S&P Global Market Intelligence prior to the company's first-quarter 2020 earnings call. "I don't think it's an overly optimistic case, as it does show deep drops in the second quarter and drops also in the third quarter. It's not until late in the third quarter that things start to pull back."

Charlotte, N.C.-headquartered Duke Energy expects an increase in residential sales through the summer but "significant declines" in commercial volumes in the second quarter based on the mandatory closure of non-essential businesses in its six-state service territory. The company notes that industrial customers in the Carolinas and Midwest are beginning to resume operations after shutting down in March amid the accelerating spread of the novel coronavirus.

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For full year 2020, Duke Energy is projecting a 2% to 4% increase in residential sales, which make up 33% of total electric sales, a 6% to 9% drop in commercial volumes and 7% to 10% drop in industrial volumes.

Despite these headwinds, the company continues to target full-year 2020 adjusted EPS in the range of $5.05 to $5.45 and reaffirmed its 4% to 6% EPS growth forecast through 2024.

"Given those assumptions and given our scope, scale and ability to efficiently grab savings and benefits across our footprint to reduce costs ... we do have confidence that we can still pull back to within our earnings range," Young said.

Duke Energy has outlined $350 million to $450 million in cost cuts tied to reductions in operations and maintenance and other expenses.

"Having said that ... there's a lot we still may learn about the impacts on the economy with this pandemic and we're still early in the year," Young said. "We haven't even gone through our third quarter, which is our biggest earnings quarter that we typically see. But we're working diligently to mitigate the impacts of COVID-19 and we have a proven ability to do that."

The company has about $8.2 billion of available liquidity as of April 30 with plans to access the capital markets to support its $11 billion to $12 billion capital plan for 2020.

"We have, I think, managed the balance sheet very well," Young said, noting that Duke Energy did a $2.5 billion equity forward offering in late 2019 and accessed the debt markets in the first quarter. Duke Energy also entered into a $1.5 billion term loan in the first quarter.

"When the pandemic first hit, capital markets were very volatile, very tight and very difficult to access," Young said. "But because of the efforts we had made earlier, we could ride through that."

"I would expect capital markets to continue to be accessible at reasonable terms and conditions," the CFO added. "We do have more financing to do this year."

Duke Energy also has reaffirmed its five-year $56 billion capital plan and is not forecasting "any significant delays" to major projects, including the Atlantic Coast Pipeline LLC project.

"We'll continue to move forward with our regulated related projects, whether it's gas distribution or electric infrastructure," Young said. "We will always maintain the flexibility in our capital plan to adjust. If we run into a situation where capital markets are tight, we can pull back on projects. If we run into a situation where we've got a storm, we can defer efforts for a couple of weeks while we deal with that. But our intent right now is to move forward with our financial plans and our capital profile."

Overall, Duke Energy is prepared for a worst-case scenario and believes it has the financial tools and regulatory support to offset a prolonged economic recovery, according to the CFO.

"We try to look at a range of outcomes and what the response might be under those circumstances," Young said. "I can't go into details on the more extreme situations you might see. But we've always shown an ability, I think, to adapt our business on broad scales when necessary. We've redefined the portfolio in the past. We've realigned strategies before. So, we have that capability."