Duke Energy Corp.’s earnings rose 2 percent in the second quarter on higher electric rates, but newly acquired subsidiary Progress Energy saw earnings plummet as a result of planned nuclear plant outages.
Duke said Thursday that it earned $444 million, or 99 cents per share, on revenue of $3.58 billion in the quarter. Last year, the company earned $435 million, or 98 cents per share, in the period on revenue of $3.53 billion.
Adjusted to eliminate the effect of a recent stock split and merger costs, Duke earned $1.02 per share. Analysts expected Duke to earn 97 cents per share, according to FactSet.
Duke Chief Financial Officer Lynn Good called the quarter “extraordinary” in an interview. Duke’s biggest division, regulated utilities that deliver power to customers in the Carolinas, saw earnings rise because regulators there allowed Duke to charge customers more for electricity. Also, last year the company was hurt by high storm-related maintenance costs.
This is the first quarter that Duke has reported earnings as the nation’s largest utility, a month after it completed what became an acrimonious combination with in-state rival Progress Energy.
“They needed a good quarter to brighten the mood around there,” said Andy Smith, an analyst at Edward Jones. “It’s something they want and needed to get the attention on the actual results.”
Duke reported results for Progress, which it acquired July 2, separately. Progress’s net income fell 64 percent on higher operating costs because it had to shut down three nuclear reactors in the Carolinas to refuel them.
Duke reported that Progress earned $63 million, or 21 cents per share, on revenue of $2.27 billion in the quarter. Last year Progress earned $176 million on revenue of $2.26 billion.
In a surprise move only hours after the deal between Duke and Progress was completed, Duke’s new board members voted to oust the CEO it had just named — former Progress CEO Bill Johnson. They replaced him with Jim Rogers, who had been Duke’s CEO but was slated to become executive chairman after the close of the deal.
In the wake of the switch, top executives and board members who had come to Duke from Progress as part of the deal have resigned, and North Carolina’s utilities regulator has launched an investigation into the deal to determine if the state was misled during the merger approval process. Duke board members who have testified in the case say the board lost confidence in Johnson’s ability to lead the company.
In an interview Thursday, Duke CEO Jim Rogers blamed Progress’s poor second quarter results on unique timing issues — with three nuclear reactors down at once for refueling, Progress wasn’t able to generate as much power as a year earlier.
But the poor results may help Duke’s board defend its decision to remove Johnson.
Rogers said that despite the management turmoil, the integration of the two companies is going well. “We have our 350 top leaders in place, and they are focused on results,” he said. “I’m very pleased with the way people are pulling together.”
The rancor between Duke and regulators prompted Standard & Poor’s to downgrade the company’s debt. Duke is scheduled to ask regulators for a rate increase this year, and the poor relationship between regulators and the company hangs over those negotiations.
Rogers doesn’t think it will have any affect. “We expect they will address each case on its merit,” he said.
Duke, based in Charlotte, N.C., is the largest U.S. utility, with 7.1 million residential and business customers in North Carolina, South Carolina, Ohio, Kentucky, Indiana and Florida.