Duke Energy will sell its international business, the company said Thursday as it announced 2015 earnings that were hurt by volatile returns in Central and South America.
Duke reported year-end earnings of $2.8 billion on $23.5 billion in revenue, well up from the previous year but short of analysts’ expectations.
Adjusted income from the international business fell to $225 million in 2015 from $428 million in 2014. The business, which consists largely of hydroelectric power plants in Brazil, provides about 10 percent of the company’s earnings.
The decision to sell the business – for which Duke offered no expected timing – reverses a decision one year ago to hold onto it. It’s part of a move away from investments with uncertain returns, such as the Midwestern merchant fleet it sold to Dynegy for $2.8 billion last year, toward the safety of more predictable regulated businesses.
International business has been buffeted by drought and weak currency exchange rates. But steady dividend growth lures shareholders to Duke’s stock, chairman and CEO Lynn Good said.
“Our investors are looking for stability, for predictability, they’re looking for low risk, and so we do believe that businesses that show that level of volatility ... are not a fit for us,” Good said in an interview.
Duke’s $4.9 billion acquisition of Charlotte-based Piedmont Natural Gas was viewed as a step in that direction. The acquisition still needs approval in North Carolina and Tennessee but is expected to close by the end of 2016.
Duke announced earlier this month that it was considering a sale of its international business. Analysts at Sanford Bernstein estimate the value of the business at $2.3 billion.
Moody’s saw a sale as a positive because it would eliminate the most volatile sector of Duke’s holdings. The sale could also help Duke with the Piedmont acquisition, which the company has planned to finance largely with debt.
Duke’s profit for 2015 was compared with about $1.9 billion in net income and $23.9 billion in revenue in 2014. Duke reported earnings of $4.05 a share for the year compared with $2.66 in 2014.
Duke said a couple of strategic moves, completed early, helped offset the international results in 2015. Among them were its $1.25 billion purchase of stakes in four power plants owned by the North Carolina Eastern Municipal Power Agency, which serves towns and cities in that region. That deal closed in July.
Annual adjusted earnings a share for the year were $4.54, down one cent from 2014. Among the one-time costs that hurt Duke’s 2015 reported earnings were severance payments, a regulatory settlement in Indiana and merger costs.
Fourth-quarter earnings of $477 million compared with the $97 million in the fourth quarter of 2014. Mild December weather became a drag on earnings for the quarter.
Adjusted for one-time expenses, Duke earned 87 cents a share in the fourth quarter, up one cent from a year ago. Analysts surveyed by Zacks Investment Research had expected 94 cents a share.
Duke shares closed Thursday at $76.21, up 71 cents. The stock is up 7 percent this year.