(Bloomberg) -- Duke Energy Corp. will take a $1.3 billion impairment loss on the sale of its commercial renewable business, which it now expects to close later this year, according to its earnings release Thursday.

The utility previously indicated it would sell the unit, which it said last year had a book value of about $3 billion.


After the writedown, the assets now have a book value of around $1.5 billion or $1.6 billion, Chief Financial Officer Brian Savoy said in a telephone interview Thursday.

Renewable assets like wind and solar farms receive big tax credits in their first years of operation, and their owners include those credits when they set a value on the assets, according to Savoy. A reevaluation of the asset value after those credits have been collected results in a lower value, he said.

Asked whether Duke had overvalued the renewable assets on its books, Savoy said, “I wouldn’t call it overvaluing. I would say that if you decide to sell these assets at any point in their life, you’re setting yourself up for an impairment.”

Some experts questioned the practice of a company carrying tax benefits on its books even after the benefits have been exhausted. “It seems weird to characterize something as a loss when you always knew this was going to happen,” said John Marciano, an attorney at Allen & Overy who does tax and clean energy work. “Calling it a writedown is kind of misleading.”

The unregulated assets Duke is selling include wind and solar farms in Texas, Wyoming and Utah, which generate about 3.5 gigawatts of power, according to the company.

Duke’s charge is the second writedown of a renewable unit this week. Dominion Energy Inc. said Wednesday it would take a $1.5 billion impairment on the value of its unregulated solar generation facilities.

Duke shares fell 1.7% as of 3:54 p.m. in Thursday trading.

“The bottom line is that writeoffs, generally speaking, are not good,” said analyst Paul Patterson of Glenrock Associates LLC. “We’re finding that in some cases the values these companies have on their books for these assets is different when they go to sell them, and not in a good way.” 

(Updates shares and adds comments from experts in sixth and 10th paragraphs.)

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