Tags: Earns Duke Energy

Duke Energy’s Earnings Jump on Asset Sales, Cold Weather

Thursday, 17 Feb 2011 02:07 PM

A frigid winter and sales of assets boosted Duke Energy's net income 23 percent in the fourth quarter.

The company earned $427 million, or 32 cents per share, compared with $346 million, or 26 cents per share, a year earlier. Excluding one-time items, the electric and gas utility earned 21 cents per share.

Revenue rose to $3.45 billion from $3.11 billion.

The company's regulated businesses, especially in North and South Carolina, performed well in the last three months of 2010. Revenue grew 10 percent, helped by rate increases and cold weather. But revenue from the company's smaller commercial power business fell 30 percent in the quarter as customers in Ohio switched to cheaper competitors.

For the full year, Duke's earnings rose 20 percent to $1 per share from 83 cents per share in 2009.

Last year's steamy summer boosted demand for electricity to run air conditioners. Then a cold and snowy winter across much of Duke's service territory led to a demand in gas and electricity for heating.

"It was my perfect year," said Duke CEO Jim Rogers in an interview.

This should also be a big year for Rogers and Duke. Last month it announced plans to buy Progress Energy for $13.7 billion. If approved, Duke will become the largest utility in the U.S. Rogers expects the deal close this year

Duke and other utilities have been struggling since the recession and financial crisis of 2008 cut deeply into demand for electricity. Also electricity prices have stayed low even as the economy has begun to pick up because natural gas, which is used to generate electricity and often to set its price, remains cheap.

Demand has started to return, though, led by an increase in manufacturing.

Duke said Thursday that industrial demand grew 7 percent in 2010. Overall demand grew only 2 percent because commercial and residential usage remained weak, according to Lynn Good, Duke's chief financial officer.

Good said that demand from factories typically picks up first after recessions, followed later by demand from homes and stores.

This year the company expects industrial demand to grow a slower rate of about 2 percent. Commercial and residential demand is also expected to grow, but more modestly.

"We're looking for people to buy more iPads and then plug them in," Rogers said.

The company predicted it would earn $1.35 to $1.40 per share in 2011, above analyst estimates of $1.33 per share. Duke shares rose 1.9 percent in morning trading to $18.05.

"We were encouraged by their outlook," said Patrick Goff, an analyst at Morningstar.

Goff said Duke did a good job keeping costs down and running its plants well over the past year. "Their operation and maintenance costs have been basically flat for four years running now," he said.

Lower demand and power prices helped push Duke and Progress together. The companies expect to save $600 to $800 million in fuel costs over the first five years after the merger closes.

The combined company's heft will make it easier to pay for— and profit from — upgrades to existing plants and construction of new, cleaner power plants like nuclear reactors as environmental regulations toughen.

Duke says coming environmental regulations meant to reduce toxic emissions from coal plants could cost as much as $5 billion over the next several years.

The company plans to set aside $250 million in 2012 and $500 million in 2013 to update emissions controls at its older plants.

If state regulators allow Duke to recoup the cost of environmental upgrades through higher customer rates, however, Duke could benefit.

While Duke's regulated businesses improved, its unregulated units in the Midwest struggled.

In a conference call with investors Thursday, Rogers called Ohio's electric regulation "broken." Duke has asked Ohio regulators to change its rate structure beginning in 2012. It expects a response in February.

In Indiana, Duke is struggling to control costs and the construction schedule of a giant advanced-technology coal gasification plant that, if needed, could eventually be able to capture carbon dioxide emissions.

The company's original cost estimate was about $1 billion below the current $2.9 billion estimate. It has asked Indiana regulators for permission to recoup $500 million of the added costs. It expects to complete the plant in 2012.

During the fourth quarter Duke posted a gain of $139 million from its sale of half of its interest in DukeNet Communications, a fiber optic communications company. It also made $109 million from the sale of Q-Comm Corp., a telecommunications company.

Duke Energy Corp., based in Charlotte, serves 4 million customers in North Carolina, Indiana, Ohio and Kentucky.

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A frigid winter and sales of assets boosted Duke Energy's net income 23 percent in the fourth quarter.The company earned $427 million, or 32 cents per share, compared with $346 million, or 26 cents per share, a year earlier. Excluding one-time items, the electric and gas...
Earns Duke Energy
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2011-07-17
Thursday, 17 Feb 2011 02:07 PM
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