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Duke Energy Profit Falls On Charge, Weather, Yet Tops Estimates; Backs Forecast

Electric utility Duke Energy Corp. (DUK: Quote), which is in deal to buy Progress Energy Inc. (PGN: Quote) to become the largest US utility, reported Friday a sharp decline in first-quarter profit hurt by a settlement charge. Adjusted earnings declined as revenues were slightly hurt by unfavorable mild winter, while both earnings per share and top line beat Street estimates. The company also backed its fiscal 2012 earnings forecast.

Chairman, President and Chief Executive Officer James Rogers said, "Our first quarter adjusted results highlight the ability of our diverse business operations and cost control measures to mitigate the impacts of the mild weather we experienced."

For its first quarter, net income attributable to the company plunged to $295 million or $0.22 per share from $511 million or $0.38 per share last year.

The latest quarterly results were hurt by charges of $0.20 per share related to the company's Edwardsport Integrated Gasification Combined Cycle project. The charge is the result of the provisions of a settlement agreement related to regulatory proceedings involving the project. This was partly offset by a $0.04 per share gain on voluntary opportunity plan deferral.

Adjusted earnings per share, which excluded one-time items, declined to $0.38 from $0.39 in the prior-year quarter. On average, 9 analysts polled by Thomson Reuters expected earnings per share of $0.37 for the quarter. Analysts' estimates typically exclude one-time items.

The company noted that the effects of unfavorable weather were largely offset by the implementation of new customer rates in the Carolinas and reduced operation and maintenance costs at the regulated utilities.

Quarterly operating revenues dropped to $3.63 billion from $3.66 billion a year earlier, while analysts were looking for $3.60 billion.

Segment-wise, U.S. Franchised Electric and Gas or USFE&G segment's operating revenues edged down to $2.67 billion, while adjusted segment income increased from last year. USFE&G's quarterly results were primarily driven by the implementation of new customer rates in the Carolinas, lower operation and maintenance costs and a favorable revenue true-up.

Revenues and income in the commercial power segment also declined mainly because of lower results from the Midwest coal generation fleet and lower volumes realized by Duke Energy Retail.

International energy revenues and income increased primarily due to favorable volumes and pricing in Brazil and National Methanol, partially offset by the prior year favorable arbitration award in Peru.

Citing the first-quarter performance, the company said it is well-positioned to achieve 2012 adjusted earnings guidance range of $1.40 to $1.45 per share. Analysts expect earnings of $1.43 per share for the year.

With respect to the proposed merger with Progress Energy, the company said it continues to work with federal and state regulators toward its successful completion and the deal is expected to close on July 1.

In pre-market activity, shares are currently trading at $21.41, up $0.01 or 0.05 percent.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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