Duke Energy profits for 2012 rise narrowly

bhenderson@charlotteobserver.comFebruary 13, 2013 

Duke Energy claimed a strong report card Wednesday for the first six months after its merger with Progress Energy, reporting smaller earnings per share for 2012 but financial results that beat analysts’ estimates.

Boosted by the Progress merger, more favorable weather and a North Carolina rate increase last year, net income rose to $435 million in the fourth quarter compared with $288 million in 2011. Merger costs and other factors cut earnings per share to 62 cents from the 65 cents of the previous year.

Not including those special costs, fourth-quarter earnings of 70 cents beat analysts’ 65-cent consensus estimate.

“We brought the organization together and were able to hit our financial targets” following the merger, said Chief Financial Officer Lynn Good. “It was strong execution across the business.”

Duke brought three new North Carolina power plants online in 2012, saw steady performance by its nuclear fleet and resolved state investigations in North Carolina and Indiana.

For the full year, reported earnings of $3.07 a share compared with $3.83 in 2011. Costs of the Progress merger took 70 cents from those earnings, and cost overruns at the Edwardsport power plant nearing startup in Indiana another 70 cents.

Adjusted for special charges, earnings per share of $4.32 for 2012 compared with $4.38 in 2011. Net income for 2012 rose slightly to $1.76 billion from the prior year’s $1.7 billion.

Sales from Duke’s regulated utilities, discounting weather factors, rose a sluggish 0.6 percent for 2012.

Industrial sales, boosted by the automotive sector, were up 1 percent and commercial sales rose 0.7 percent. Residential sales lost ground despite a growing customer base, as electricity use per consumer dropped.

Duke doesn’t expect economic growth to accelerate until the second half of this year. It will present a more detailed financial outlook at a Feb. 28 investors’ conference in New York.

Duke’s stock closed Wednesday at $68.82, up 9 cents.

Troubled Fla. plant to close

This month Duke resolved another thorny issue that came with the Progress merger, announcing it will shut down the troubled Crystal River nuclear plant in Florida.

A mediator proposed the $530 million settlement of insurance claims for the plant that Duke accepted, CEO Jim Rogers said. Duke faced repair estimates of up to $3.4 billion.

“This would have been a first-of-its-kind repair, and we had a very low degree of confidence that the repair could be completed on our estimated cost and schedule,” Rogers said in an interview.

Duke is likely to replace the nuclear plant with a natural gas-fueled plant. While a site has not been picked, Rogers said, “we could well build it, with the infrastructure we have in place, at the Crystal River site,” where two coal-fired units will retire in 2015 and 2016.

Duke Energy Carolinas, meanwhile, filed this month for a 9.7 percent rate hike in North Carolina. A second Duke subsidiary, Progress Energy Carolinas, is seeking an overall 11 percent increase.

Most of the new revenue would pay for capital projects including new power plants to replace older, dirtier-burning units Duke is retiring in the face of tougher environmental standards.

“The fact that more than 93 percent (of the increases) is tied to preapproved projects helps us, because we made investments that (the commission) approved and brought them in on budget,” Rogers said. “The reality is no one likes a rate increase, and obviously there will be some pushback. But clean air is not cheap.”

Rogers would not comment on whether Duke shareholders will have to cover the $10 million line of credit extended to the Charlotte host committee for the Democratic National Convention. Duke reported a $10 million charge for DNC support in its 2012 earnings report.

Rogers, who will retire from Duke by the end of the year or sooner, also dismissed speculation he could replace U.S. Energy Secretary Steven Chu, who has announced his resignation.

“They have a number of great candidates for that job, and the reality is I’m still CEO here and I have more work to do, and they need to replace him sooner not later,” he said. Rogers says he’s interested in helping bring electricity to undeveloped nations.

Henderson: 704-358-5051 Twitter: @bhender

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