Duke Energy misses mark

Weather and an ailing economy slam earnings in the third quarter, but the CEO is optimistic

CHARLOTTE -- 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 $215 million, or 17 cents per share, compared with $607 million, or 48 cents per share in 2007.

Last summer was mild, especially when stacked against the heat wave of 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 $124 million from its interest in Crescent, compared with $10 million 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 said in an interview.

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," Rogers 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.

He made the election comments in the midst of discussing the company's third-quarter earnings, which he called disappointing. However, he said he thought a strong performance earlier in the year would help the full-year performance. Duke does not think 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 $3.92 billion 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.

In 2006, Duke initially estimated the plant's costs at $4 billion to $6 billion.

Spokeswoman Rita Sipe said the latest estimate was based on a more detailed review of costs, including expenses for building infrastructure on an undeveloped 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.