Duke Energy reports big jump in earnings

08/07/2014 7:43 AM

08/07/2014 7:52 AM

Duke Energy’s second-quarter earnings jumped 80 percent as the company reported upticks in all business segments Thursday and increased its earnings outlook for the year.

Duke’s regulated utilities benefited from higher rates, warm weather that kept air conditioners humming and lower operating costs. The second quarter of 2013 had milder weather by comparison.

The $609 million in profit, on $5.9 billion in revenue, resulted in reported earnings per share of 86 cents. That compares to the 48 cents of the same quarter a year ago.

Earnings adjusted for one-time items were $1.11 a share, compared to 87 cents a year ago. That beat the 98 cents analysts surveyed by Thomson One Analytics had expected.

“We continue to be able to control operating and maintenance (costs) and find efficiencies in our operations,” said chief financial officer Steve Young. “We’re also benefiting from newly-signed, contracted wholesale customers, and we recognized some income tax efficiencies this year.”

Duke increased its earnings guidance for the year from $4.45 to $4.60 a share to $4.50 to $4.65 a share. Duke’s stock closed Thursday at $70.60, up 76 cents.

As it released earnings, Duke discussed several other recent, impending or potential acquisitions and sales:

• Duke said it will pursue an ownership stake in the natural gas pipeline into North Carolina for which it and partner Piedmont Natural Gas are soliciting proposals.

Duke had previously said ownership was one of several options for the project, which would add a second major pipeline in the state. Duke relies increasingly on gas to make electricity as it retires coal-fired power plants. Piedmont, which serves some Duke plants, has a fast-growing customer base.

A winning proposal will be announced within a few weeks, Duke said, accelerating its previous schedule of making a selection by the end of the year. The pipeline is expected to be completed by late 2018.

• • Duke’s international business, which makes electricity across Central and South America, will undergo a strategic review by the company. The unit contributes 12 percent to earnings.

Selling the business is an option, president and chief executive Lynn Good told analysts, but not the intended goal. Among the review’s goals are repatriating $1.7 billion in offshore cash.

• The company said last month it will pay $1.2 billion for the interests in four of its power plants held by Eastern North Carolina municipal power systems. Duke and the munis signed a 30-year contract to provide wholesale power to the 32 towns and cities.

The agreement hinges on regulatory approval and legislation to let the municipalities sell revenue bonds. The generating capacity that Duke will buy includes 500 megawatts of nuclear power, which is among Duke’s lowest-cost generating options.

Duke took a nearly $1.4 billion charge in the first quarter to reflect the value of the interest it’s selling in 13 commercial power plants in the Midwest.

Good said the company will adjust its coal-ash disposal plans to comply with North Carolina legislation, which stalled last week in Raleigh.

“In the interim, as we discussed back in February and March in putting forward our comprehensive (disposal) plan, we are continuing to move forward on that plan and will make adjustments to it once the legislation is ultimately passed,” she said.

Duke has estimated costs of $2 billion to $2.5 billion to remove ash from ponds at four power plants, cap it in place at 10 others and move to handling ash in dry form. Landfilling ash at those 10 plants would cost $6 billion to 8 billion, it says, while further changes could push total costs to as high as $10 billion.

“The more excavation, the higher the cost,” Good told analysts, saying total costs would likely land somewhere in the middle of those estimates. Duke expects to ask the N.C. Utilities Commission to decide what costs may be passed to customers.

Good wouldn’t comment, in an interview, on the prospects of settling litigation against the company by North Carolina regulators and environmental advocates, or on state and federal investigations of its Feb. 2 ash spill into the Dan River.

“We are cooperating fully with all the investigations that are occurring and also vigorously defending the company in all of the litigation and other investigative items,” she said. Those issues, she said, “have the highest attention of the company.”

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