May 7, 2014 / 11:52 AM / 4 years ago

UPDATE 2-Duke Energy profit beats as power demand, rates rise

* Adjusted profit $1.17/share vs est. $1.12

* Operating revenue rises 12 pct to $6.62 bln

* Operating revenue from regulated utilities rises 14 pct (Adds comments from CEO, CFO, analyst; updates shares)

By Swetha Gopinath

May 7 (Reuters) - Duke Energy Corp, the largest U.S. power company by market value, reported a better-than-expected adjusted profit for the second straight quarter as a particularly harsh winter boosted power demand.

The company, which derives more than 80 percent of its revenue from utilities whose rates are regulated by states, also benefited after North Carolina, South Carolina and Florida approved its request to raise rates last year.

Duke, which sells power to 7.2 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky, said operating revenue from regulated electric utilities rose 14 percent to $5.58 billion in the first quarter ended March 31.

“In our service territories we are starting to see, hopefully on a continued basis, a rebound in electricity consumption by our residential and commercial customers,” Chief Financial Officer Steven Young told Reuters.

Duke, which struggled with tepid power sales after the recession of 2008 as customers cut spending, said this was the third consecutive quarter of economic growth in their markets.

Duke spent $15 million in the first quarter to clean up a massive spill of toxic coal ash into the Dan River in North Carolina. Chief Executive Lynn Good said additional costs would not be material.

The company said last month moving its coal-ash dumps away from rivers and lakes in North Carolina may cost it $2 billion to $10 billion.

Duke said it took a $1.4 billion charge in the first quarter to write down the value of the Midwest commercial generation business, which it plans to sell to shield itself from volatile prices for power sold on the wholesale market.

UBS analysts said the 13 plants on sale had a fair value of $2.2 billion. Duke is selling 11 plants in Ohio and one each in Illinois and Pennsylvania.

“It is apparent that the power renaissance and seemingly more M&A demand has been a factor in lifting the valuation, although ash liabilities appear to be traveling with the portfolio,” the analysts wrote in a note.

Young said Duke was talking to potential buyers and plans to close the sale by the fourth quarter or the first quarter.

Excluding the writedown of the plants, first-quarter profit was $1.17 per share, above the average analyst estimate of $1.12, according to Thomson Reuters I/B/E/S.

Duke’s customer base is second only to that of Exelon Corp , which said last month it would buy Pepco Holdings Inc for $6.83 billion, bumping up its number of customers to 10 million.

Duke’s operating revenue rose 12 percent to $6.62 billion, beating the average analyst estimate of $6.44 billion.

Duke’s shares have risen 6 percent this year to Tuesday’s close, valuing the company at $51.66 billion. They were up 1 percent at $73.61 on the New York Stock Exchange on Wednesday. (Reporting by Swetha Gopinath in Bangalore; Editing by Sriraj Kalluvila and Don Sebastian)

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