UPDATE 2-Duke Energy profit misses Street on weak commercial sales

Wed Aug 7, 2013 8:26am EDT

By Ernest Scheyder

Aug 7 (Reuters) - Duke Energy Corp, the largest power provider in the United States, posted a lower-than-expected quarterly profit on Wednesday due in part to weak commercial sales.

Duke, which uses coal, natural gas and nuclear plants to generate electricity, has struggled this year with sales to large, U.S. commercial clients affiliated with PJM Interconnection, a wholesale distributor that holds a popular auction for companies to sell electricity.

Wholesale prices dropped this year to $16 per megawatt hour in a PJM auction from $110 per megawatt hour in 2012, due in part to overcapacity, sharply denting Duke's profit. The low prices are only temporary and should rise next year to $126 per megawatt hour, CEO Lynn Good said in an interview.

"You can expect the prices to increase from here to 2015 and then they'll moderate," said Good, who was named Duke's CEO earlier this summer.

Despite the disappointing commercial sales, Duke still expects to earn $4.20 to $4.45 per share this year. The midpoint of that forecast roughly matches analysts' average estimate of $4.33.

Good said she believes Duke can hit that goal as rate increase requests are approved in North Carolina and Ohio and the company squeezes more cost savings from the integration of Progress Energy, acquired last summer for $18 billion.

"We're going to hit consensus," Good said. "We feel like we have built a lot of momentum and have resolved our near-term priorities and are positioning the company for the future."

RESULTS

For the second quarter, the company posted net income of $339 million, or 48 cents per share, compared with $444 million, or 99 cents per share, in the year-ago period.

Excluding charges to write off investments in a failed Florida nuclear project, as well as other one-time items, the company earned 87 cents per share.

By that measure, analysts expected earnings of 94 cents per share, according to Thomson Reuters I/B/E/S.

The company's 2012 buyout of rival Progress Energy substantially increased the company's float.

Operating revenue rose to $5.88 billion from $3.58 billion, missing the $5.73 billion expected by Wall Street.

Duke's shares have gained 11.5 percent so far this year and closed Tuesday at $71.12.

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