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International weakness weighs on Duke Energy’s Q2 earnings

The Duke Energy Center in uptown Charlotte as clouds begin to break-up .
The Duke Energy Center in uptown Charlotte as clouds begin to break-up . dhinshaw@charlotteobserver.com

Charlotte-based Duke Energy reported second quarter earnings that were lower than expected because of tax items and continued weakness in its Latin American markets. Still, the company says it remains on track to meet full-year financial goals.

For the three months ending June 30, Duke Energy reported earnings of 78 cents a share on profits of $543 million, according to a securities filing Thursday. That was down from 86 cents a share in the same quarter of 2014.

Adjusted for one-time costs and gains, Duke’s earnings were 95 cents a share, 4 cents below the consensus forecast of 15 analysts surveyed by Bloomberg and below earnings of $1.11 a share from the second quarter of 2014.

The company reported revenue of $5.59 billion, below the Wall Street estimate of $5.85 billion and down from $5.71 billion in the second quarter last year.

Income from Duke’s international business, which makes up about 10 percent of all of the company’s business, was $52 million for the quarter, down about 64 percent from the second quarter of 2014.

Brazil makes up about 40 to 50 percent of Duke Energy’s international business, and that country’s weak economic conditions and lower demand for electricity weighed on second quarter results, the company said.

Helping to offset international weakness, Duke said, was a $1.5 billion stock buyback program, which boosted earnings by about 3 cents a share. The buyback was in connection with the $2.8 billion sale of 11 power plants in the Midwest in April to Houston-based Dynegy.

Also helping to boost earnings was the company’s regulated utility business, driven by wholesale and retail growth that Chief Executive Officer Lynn Good called “very strong.”

“Retail growth has been an area of focus for our industry for a number of years coming out of the economic downturn,” Good said in an interview with the Observer.

Duke said it is still on track to meet its adjusted earnings projections of $4.55 to $4.75 a share for 2015.

Concerning the company’s coal ash removal, Good said in a call with investors that Duke has made “significant progress,” citing the company’s June announcement that it would excavate 12 more coal ash basins in North Carolina. The remaining ash basins, she said, are being further studied to determine appropriate closure methods.

“Given our efforts over the past year, we are ahead of the curve in adapting to changing regulations our industry faces with ash management,” Good said.

On Monday, the Environmental Protection Agency announced a “Clean Power Plan” that would place new limits on carbon dioxide emissions from power plants. Under the plan, North Carolina will have to reduce its carbon dioxide emissions from power plants by 36 percent. State lawmakers have said they will challenge the law in court.

Duke has said that even even without federal regulations, the company has reduced carbon dioxide emissions from its power plants by 22 percent since 2005.

“We are still digesting this rule. It’s about 1,500 pages,” Good said.

Katherine Peralta: 704-358-5079, @katieperalta

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