Duke Energy has trimmed its long-term growth outlook for electricity demand in the face of a modestly rebounding economy and flat energy usage by residential customers.
Third-quarter earnings released Wednesday rose from a year ago as Duke shed the costs of completing its 2012 merger with Progress Energy, but they fell short of Wall Street’s expectations.
The report showed demand for electricity rising 1.7 percent for the quarter, when the effects of weather are not included, compared with the same period last year. Industrial sales accounted for much of the increase. While the number of residential customers grew nearly 1 percent, energy use per customer stayed flat.
Long-term, CEO Lynn Good told financial analysts, Duke expects sales to grow only 0.5 percent to 1 percent a year. In recent years, annual growth has been about 1 percent.
Duke said it remains cautiously optimistic about the nation’s economic recovery and still expects earnings to grow 4 percent to 6 percent a year through 2015.
Cooler than normal weather, which also hurt third-quarter sales, dampened the impact of $600 million in new revenues that began to flow in from rate increases in the Carolinas and Ohio.
Duke’s profit jumped to $1 billion from the $594 million in the third quarter of 2012. The difference largely reflects merger costs and a 2012 charge for cost overruns at the Edwardsport power plant in Indiana. The $6.7 billion in revenue for the quarter matched the previous year’s.
Reported earnings per share were $1.42, compared with 85 cents a year earlier. Adjusted for merger and other one-time costs, Duke earned $1.46 a share, compared with $1.47 a year earlier and below the $1.51 Wall Street analysts had expected.
Duke’s earnings also missed analysts’ earnings estimates in the first and second quarters of this year. Third-quarter earnings are especially significant for electric utilities because they reflect sales during the warm-weather months when demand for electricity peaks.
Charlotte recorded its mildest third-quarter weather since 2004, Duke said, and temperatures were 18 percent milder than normal in the Carolinas. That hurt sales.
“I’m pleased with where we are for the quarter, and we’re on track to deliver our (earnings) guidance range for the year,” Good said in an interview.
Duke slightly raised its full-year adjusted earnings guidance from a range of $4.20 to $4.45, to a range of $4.25 to $4.45.
Duke said it is ahead of expectations in fulfilling the $687 million in fuel and fleet operation savings guaranteed to Carolinas customers over five years, under terms of its merger approval. About half of the savings target has already been achieved or is locked in by contracts, it said.
Through the third quarter, Duke has realized $145 million in savings, of which $70 million has already been reflected in the fuel-cost portion of customer bills.
“We’re ahead of where we expected to be, but with 3-1/2 years remaining, we’re going to take our time to get more specifics on timing as these savings materialize,” Good said.
After just completing a round of new coal and natural gas-fueled plants in the Carolinas and Indiana, Duke’s next round of construction – and accompanying rate increases – could begin in 2015.
Duke has filed preliminary plans for new gas-fueled power plants in Florida and South Carolina. It continues to consider buying up to a 10 percent stake in the Summer nuclear plant near Columbia.
The company also expects to spend $5 billion to $6 billion over the next decade to meet coming environmental regulations.
Duke’s stock closed Wednesday at $73.21, up 76 cents.
Henderson: 704-358-5051; Twitter: @bhender
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