Duke turns second-quarter profit on higher revenue

August 2, 2011

Duke Energy Corp., which is buying Progress Energy Inc. to become the largest U.S. utility owner, on Tuesday reported a second-quarter profit after a year-ago loss as foreign exchange rates benefited its international units.

Earnings were $435 million, or 33 cents a share, compared with the year-ago loss of $222 million, or 17 cents, Charlotte, N.C.-based Duke said in a prepared statement.

Duke, which has about 780,000 customers in Indiana, affirmed its full-year forecast for profit of $1.35 to $1.40 a share, excluding quarterly adjustments to the value of contracts used to lock in margins at commercial power plants and special items. Sales rose 7.5 percent, to $3.53 billion.

“There was a very nice 42-percent increase in their international power business,” said Nathan Judge, a London-based analyst for Atlantic Equities LLC, who rates Duke “neutral,” owns none and had expected quarterly profit of 30 cents a share. “That’s the reason they beat our expectation.”

International operations, which include hydroelectric dams in Brazil that sold power at higher prices and a stake in National Methanol Co. in Saudi Arabia, may have benefited from higher foreign currency values as the U.S. dollar fell, Judge said. Earnings from the segment were $179 million before interest and taxes, compared with $126 million a year earlier.

In the U.S., utility earnings before interest and taxes fell 7.7 percent, to $619 million, on storm damage and as cooler weather reduced the demand for air conditioning, Duke said.

Duke shares have dropped 5 percent this year. The shares have 19 hold ratings and 2 sells from analysts.

Shareholders of Duke and Progress are scheduled to vote Aug. 23 on the $14.4 billion takeover, which would create a company selling electricity to more than 7.1 million homes and businesses in six states from Indiana to Florida. Regulatory approvals are expected by year end, the companies told shareholders in a July 7 filing.

Year-earlier results included pretax costs of $660 million to reflect the lower value of plants in the U.S. Midwest that sell power on competitive wholesale markets. Benchmark power prices in PJM Interconnection LLC averaged $53.51 a megawatt-hour last year, 21 percent less than the previous five-year average.

The Progress purchase will reduce sales on competitive markets by half, to about 12 percent of revenue, according to the filing.

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