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Duke profit falls on nuclear charges, mild weather

Duke Energy’s proposed agreement last week on nuclear power plants in Florida bit into second-quarter earnings that fell 24 percent from a year ago.

Duke took a $295 million charge linked to the retired Crystal River nuclear plant in Florida. An additional $65 million charge reflected Duke’s cancellation of a contract for a new plant in Levy County, Fla.

It also set aside $50 million to prepare for potentially losing a federal lawsuit over the 2009 bankruptcy of its former real estate division, Charlotte-based Crescent Resources.

Mild summer weather that slowed sales and weak earnings from Duke’s commercial division further weighed down earnings.

Duke reported $339 million in net income, compared with $444 million for the same quarter of 2012. Reported earnings per share fell to 48 cents a share from 99 cents last year.

Adjusted for one-time costs such as the nuclear charges, earnings were 87 cents a share compared with $1.02 a year ago and well below analysts’ estimates of 94 cents.

“We were expecting the first half of the year to be relatively weaker than the second half as a result of all the regulatory proceedings. That gives us the confidence to reaffirm (2013 earnings) guidance at $4.20 to $4.45,” said CEO Lynn Good.

In the second half of the year, Duke expects new rates to go into effect in the Carolinas and Ohio. Duke expects further savings from its merger last year with Progress Energy and a 10- to 12-cent earnings boost from accounting changes for nuclear outages that it has proposed in the Carolinas.

Revenue rose to $5.9 billion from $3.6 billion from last year, a period that did not include results from Progress Energy, with which Duke merged in July 2012.

Cooler than normal summer weather that cut into electricity sales took 5 cents off earnings. Duke’s commercial and international business units also fell 5 cents and 3 cents, respectively, for the quarter. Regulated units rose 36 cents a share, mostly because of the addition of Progress.

Adjusted to account for the influence of weather, Duke’s sales grew at a 0.4 percent pace for the quarter. “We came into the year expecting 0.5 growth, so we’re kind of in the range of that,” Good said. “So we continue to remain cautious about the economy.”

Duke’s stock closed Wednesday at $71.05, down 7 cents.

Lawsuit over Crescent

Prominent real estate developer Crescent Resources filed for bankruptcy protection in 2009, when Duke owned a 50 percent interest in it. In a federal lawsuit filed in 2010, shortly after Crescent emerged from bankruptcy and Duke forfeited its share of the company, creditors claimed Duke had caused the meltdown.

The suit said Duke forced Crescent to borrow $1.2 billion in 2006, despite signs of weakening real estate values, and transferred most of the money to Duke. Duke said the transactions were legitimate and broke no laws.

Duke placed $50 million, worth 4 cents a share from second-quarter earnings, into a litigation reserve. The case is set for trial next January after mediation failed, according to the annual report Duke filed in March.

“It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, that Duke Energy might incur in connection with this lawsuit,” the report said.

Good said the $50 million is part of a settlement offer to creditors but would not comment further, saying the terms are confidential.

She downplayed problems at Duke’s new coal-fired Edwardsport power plant in Indiana, which according to the Indianapolis Star shut down June 13, six days after beginning operation.

The plant cost more than $1 billion over its budget, although Duke agreed to cap costs passed to customers at $2.6 billion. It’s the largest power plant to use new technology that turns coal into a gas, allowing most air pollutants to be captured.

A unit fueled by natural gas, which the plant can also burn, returned to service on July 1. A coal gasifier came back on July 9 and has operated off and on since then, said Duke spokeswoman Angeline Protogere.

Good told financial analysts Wednesday that the shutdown was consistent with problems to be expected with a new plant. “At this point, we don’t see anything in the nature of a long-term issue,” she said.

Henderson: 704-358-5051 Twitter: @bhender
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