Even as Duke Energy reported earnings Wednesday that badly missed analysts' expectations, CEO Jim Rogers said he felt good about its prospects under the incoming administration in Washington.
Poor weather and a deteriorating economy contributed to Duke's third-quarter net income dropping 65 percent, compared with the same period last year for the Charlotte utility. Net income was $215million, or 17 cents per share, compared with $607million, or 48 cents per share in 2007.
Last summer was mild, especially when stacked against the heat wave of summer 2007. And the remnants of hurricanes Ike and Gustav produced what Duke said was the worst Midwest storm-related outages ever.
The nation's real estate crisis also continued to hurt Duke, which has a 49 percent stake in Crescent Resources, a high-end land development company. Duke reported an equity earnings loss of $124million from its interest in Crescent, compared with $10million in positive earnings for the same quarter in 2007.
Because of an accounting method, Duke does not expect to see additional operating losses connected to Crescent. “The bleeding has stopped,” Rogers told the Observer.
Like many Americans, Rogers stayed up late Tuesday to watch the presidential election returns. Unlike most people, however, he had already spent about six hours over the past few months chatting with Barack Obama, he said.
“Clearly, given the changes in the Senate and House and White House, there will be a new direction on energy and environmental issues,” he said during a conference call with analysts.
Rogers said he felt Duke was in step or a step ahead of the coming changes, citing the company's involvement in such areas as wind, solar and nuclear energy.
Those comments are far removed from criticism he leveled in the spring at Obama and his then-rival, Sen. Hillary Rodham Clinton, over their plans to cut carbon dioxide emissions but charge companies like Duke for the right to emit the gas.
He made the election comments while discussing the company's third-quarter earnings, which he called disappointing. However, he said he believed a strong performance earlier in the year would help the full-year performance. Duke does not believe it will hit its adjusted earnings target of $1.27 a share for the year. Rogers said the company is about 5 cents behind where it expected to be by the end of this quarter.
Revenue dipped about 5 percent to $3.51 billion. Wall Street had expected higher earnings, of 44 cents per share on $3.92billion in revenue, according to a Thomson Reuters poll. Duke said liquidity remained strong despite the problems in the economy.
If Duke does not hit $1.20 a share for the year, there will be no employee or management incentives payout. “We are focused on meeting or exceeding a buck twenty,” Rogers said.
In addition, Duke now says its new nuclear power plant near Gaffney, S.C., will cost $11 billion, nearly double its estimates of two years ago.
Duke included the cost estimate in a filing Monday with the S.C. Public Service Commission, which regulates utilities.
Opponents of the Lee nuclear plant, located about 50 miles southwest of Charlotte, say the high costs to ratepayers make nuclear plants a bad deal. Duke previously invested $600million on a nuclear plant at the same site before pulling the plug in 1982.
In 2006 Duke had estimated the plant's costs at $4billion to $6billion. In December, the company said industry estimates suggested construction would cost $8 billion to $8.9 billion. Spokeswoman Rita Sipe said the latest estimate was based on a more detailed review of costs, including expenses for building infrastructure on a “greenfield” site and increases in equipment and commodity prices.
Duke, a Fortune 500 company and one of the nation's largest electric power companies, supplies and delivers electricity to about 4 million U.S. customers.